The Institute for College Access & Success states that seven in ten college seniors graduate with debt totaling $29,650.
As a result, 53% of millennials are receiving financial help from their parents.
And, with The Federal Reserve Bank of Boston finding that housing is less affordable for today’s young adults than it was 20 years ago, many millennials are stuck between a rock and a hard place.
However, the good news is that there are ways to become self-sufficient and say “thanks but no thanks” to Mom and Dad’s cash.
Therefore, if you’re keen to fly the nest and get rid of your student debt fast, this is what you must do.
Money Tips for College Grads
1. Work hard
The Country Financial report reveals that one-third of millennials receive cash from their parents on a monthly basis to cover their expenses.
Meanwhile, a further 59% receive support from their parents a couple of times a year. There’s no denying that it can be difficult to make ends meet on a new graduate salary which the Bureau of Labor Statistics states averages just $684 per week or $35,592 per year.
While it may not be ideal, to clear your debts and be self-sufficient you should work as much as possible and consider taking on side hustles such as bar work in the evenings, too.
This is what 27-year-old Joey Ramirez does. After racking up $133,000 in student debt, he now works six jobs, seven days a week and takes on seasonal work to slash his debt and support himself.
2. Consolidate to Ease the Pressure of Repayments
Consolidating your student loans is an easy way of monitoring and managing your repayments. For those with private loans, consolidating is highly recommended as interest rates are typically low, meaning your monthly repayments will be reduced.
Paying less each month means there’s no need to rely on your parents to pay your cell phone bill or top your car up with fuel as you’ll have plenty left in your pocket to do this yourself, just as 25-year-old Grant Taylor discovered. With $33,000 of private student debt and an interest rate of 4.5%, Grant knew he had to do something to ease the financial burden.
He opted to consolidate his loans which cut his monthly repayments from $350 a month to just $50 and now only pays the interest on his loan, allowing him to put the extra cash towards an investment vehicle.
3. Begin Making Student Loan Payments
If you did not already start making student loan payments while you were in college, start making payments as soon as today. While most student loans have a six-month grace period, where payments aren't due, you can start making payments so you can save on interest.
For federal loans, you will make student loan payments to your loan servicer. These are companies that are hired by the government to handle payments. If you find that your payments are too high, you can find ways creative ways to pay off your student loans.
4. Work on Your Credit
If you lived off-campus in college you likely built credit by having your name on utility bills or maybe you have some credit cards to your name already. Making sure that your credit score is over 700 is important as it can benefit you in so many ways. You can learn more about credit score ranges and see where you stack up here.
5. Ditch Credit Cards
Research suggests that millennials with a credit card are more likely to build up debt. Therefore, join the 28% of people in your age group who rely on debit cards for their purchases and avoid credit cards altogether.
The Wall Street Journal reports that more than 50% of millennial credit card holders say they’ve carried over a credit card balance and have been charged interest as a result, which is the last thing you want alongside your student debt.
When you find yourself in this situation, it’s tempting to turn to your parents for financial support, so don’t let temptation take over. Instead, ditch the credit cards, the worry and the reliance that come with them.
6. Understand Investing Basics
Once you graduated from college you will likely get your first post-grad job and start getting regular paychecks. Cha-ching! While it's okay to splurge a bit, you'll want to start building up your retirement nest egg.
This means investing in your 401(k) and even open a ROTH IRA so that over time these accounts grow due to compound interest.
For example, if you invested $1,000 at age 22, that will become $20,000 when you are 72 given a 6% rate of return.
If you know you want to invest but want a professional app to do it for you then consider micro-investing apps. My personal favorite one currently is Acorns.
Acorns is a smartphone app that “rounds up” your spending to the nearest dollar and invests that difference. You link a credit card and checking account, then Acorns does the rest. This microsavings service makes investing almost painless because you are literally investing pennies at a time.
It’s a simple process. And there’s no need to ask where to get quarters to add to your investing account, as the app rounds up your purchases automatically and invests the funds for you.
The Bottom Line
As a recent millennial graduate, you’ll undoubtedly be carrying extensive debt with you. However, don’t let this sum allow you to rely on the bank of Mom and Dad anymore than is absolutely necessary.
To become an independent millennial, stay on top of your finances and cut your student debt by working hard, consolidating your debts and ditching the credit cards.