Tip: Create a Budget

Paying off student loans requires the creation of a budget. Start by doing this:

1. Write down all of your income and expenses.
2. Look for cuts in your budget, such as finding a cheaper place to live. Watch out because the cost of moving may offset your savings. If possible, rely on public transportation instead of owning a car.
3. Have your loan payments deducted automatically from your checking or savings account.
4. Set up automatic payments from your checking account into a savings or brokerage account.

Don’t let creditors create your budget for you. For example, even if a credit card company says you can skip a payment or only requires you to pay a small amount, you need to take it upon yourself to pay as much as you can. This will help you pay off your debt in a timely manner and avoid exorbitant interest charges.

Common Mistake : Filing for Bankruptcy

If you’re facing huge debts and limited job opportunities, bankruptcy is not the answer because:

• With narrow exceptions, student loans will not be discharged by bankruptcy.
• The bankruptcy laws changed recently and it’s far more difficult to wipe out your debts.
• Bankruptcy will be reported on your credit record for ten years.

Tip: Live at Home

Instead of filing for bankruptcy, look for ways to get on your feet. According to a survey by MonsterTRAK, four of ten 2005 graduates are still living with their parents. The survey found that 48 to 66 percent of the class of 2006 plan to live at home. Becoming a “boomerang kid” is one way to get a jump on your student loans.

Paying off student loans results in financial and psychological dividends. It will give you peace of mind and allow you to focus on investing for your future.

Getting Started >>