Money Wisdom for Graduating Seniors

Graduating college is one of the most memorable and exciting times of your life, and one you should be very proud of. While making the transition from the comforts of school to the unfamiliar territory of work and career may be challenging enough, you also will be learning the ropes of becoming financially independent. In addition to these tips provided earlier on $tart with Change, here are a few more words of financial wisdom to help on your way.

Pick the Right Student Loan Repayment Option

If you have student loans, one of your first decisions will be picking repayment option(s). It is really important to get organized and stay on top of your loan repayments, as getting behind or missing payments can lead delinquency or default which can be detrimental to your credit worthiness for years to come. Also, making payments on time is a great way to start building your credit history and credit score, as it indicates to potential creditors that you are financially responsible.

If you have federal loans and are unsure of what you owe, you can log in to to see the loan amounts, lender(s), and repayment status for all of your federal loans. If you’re not seeing some of your loans, you may have some private (non-federal) loans. For those loans, try to locate the original paperwork or perhaps a recent billing statement. Contact your school’s financial aid office if you are having difficulty or have questions about your records.

Keep in mind that different loans have different grace periods, which is how long you can wait after leaving school before you have to make your first payment. For example, it’s six months for federal Direct Loans, but nine months for Perkins Loans. For federal PLUS Loans, check here. Grace periods for private loans vary, so contact your lender to find out when your payments will commence.

For federal loans, there are a variety of alternatives from the standard ten-year repayment plan to plans that base your payments to a percentage of your income. Extending your payments beyond ten years will decrease your monthly payment, but you will end up paying more in interest charges, so be sure to think carefully before deciding which option you choose. Last October, the U.S. Department of Education finalized the new regulations to expand eligibility for Revised Pay as You Earn, or REPAYE program for all federal direct loan borrowers. Under this program, you will be able to cap your monthly payments at 10 percent of your discretionary income and have any remaining undergraduate debt forgiven after 20 years of making payments. (Borrowers with loans from graduate school would have to make payments for 25 years.)For more information about federal loan repayment options, visit

Private loans are not eligible for federal loan payment plans, deferments, forbearances, or forgiveness programs. Contact your lender to find out what repayment options that may offer.

Start Saving Now

One of the smartest financial moves you can make is to start saving money right from the get go. If you already have a job lined up, find out when you will be eligible to participate in your employer’s 401k or other retirement plan and sign up right away. You may think that you can’t afford it, but even a small amount will add up very quickly, especially if your employer offers a matching incentive. If you are not yet eligible, your employer doesn’t offer a plan, or are self-employed, take advantage of other retirement savings vehicles such as an IRA or SEP plan. The greatest advantage of starting to save at a young age is the power of time and the benefits of compound interest. Try out this savings calculator to illustrate how quickly your money can grow. Spend some time learning about how to begin investing by borrowing some books from your local library, or exploring resources available online such as the roadmap provided by the U.S. Securities and Exchange Commission.

Use Credit Cards Wisely

Since you will likely be inundated with many credit card offers, the temptations may be hard to resist. If you do get a card (or already have one), make a commitment to only charge what you can afford to pay off each month. Make sure you pay your credit card bill on time to avoid late charges and always pay the balance off in full. Also, steer clear of charging larger purchases, such as that flat screen TV for your new apartment, and save up instead. If you are already carrying some credit card debt, set a target date for paying it down. There a number of good calculators available online that can help you develop a plan.

Remember, Every Purchase is a Trade-off

You’ve worked hard for your degree and are looking forward to earning money to pay for those things you may have had to put on hold while going to school. Be careful not to fall into a pattern of overspending, a common mistake among recent grads. Remember, one of the keys to financial stability and wealth accumulation is to spend less than what you are taking in.

Understanding what your money is really worth can help put things into perspective. Try to think about how many hours you would have to work to afford the latest smartphone or tablet. If an item costs $300-400 and you make $15 an hour after taxes and other payroll deductions (don’t forget those), you would have to work at least 20-27 hours to earn enough to pay for it. Is it worth it? It might be but there may be other more important demands on your money right now that are more important to take care of. Take a few minutes to write down and visualize your longer term financial goals. Refer to these whenever you get tempted to buy something you really don’t need right now.

If you graduated recently, congratulations on earning your degree and starting the next chapter of your life. Hopefully, these tips will give you confidence and peace of mind to keep your finances on track to helping you reach your highest potential.

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