2011 Graduates Will Average Nearly $23,000 in Student Loan Debt; Sound Money Strategies Are Critical
SAN MATEO, CA--(Marketwire - May 25, 2011) - Even as many individuals continue to debate the value of a college education, a recent study found that 2011 college graduates will leave school with more debt than ever before at nearly $23,000 per student1.
Consumer money expert Virginia Sullivan of Bills.com recommends that students graduating with loan debt be prepared to enact a sensible financial strategy: "Students facing even minimal debt upon leaving school should have a plan in place to effectively manage their credit score and enact a sensible budget and savings strategy to begin their post-college lives. Graduates must understand that a stumble now can hurt their chances of securing credit or prime home and auto loan rates in the future."
Money Strategies for Grads
Ms. Sullivan outlined three basic money strategies for recent graduates to help them understand the impact of their financial decisions and establish sound money habits.
1. Credit History is Critical: Graduates must consider the impact to their credit score whenever they make a financial decision. Even something as innocent as skipping a light bill one month to afford a nicer Valentine's Day dinner can lower their credit score and cause them to lose out on a prime interest rate for an auto loan -- leading to higher monthly premiums for three or more years. And as more potential employers are reviewing credit scores as part of their hiring process, a bad score can hurt college grads when they apply for jobs.
2. Think Long-Term: Evaluate how decisions made today could have far-reaching economic consequences on income, career, debt, and more. Graduates should make money decisions now through the lens of three, five or ten years in the future. For example, a new car right out of school might be a poor use of graduation money if you have to pay for higher insurance and parking because you live in a city.
3. Saving is Sexy: Graduates should embrace the concept of savings at an early age. Not only is savings chic, but it will also help establish good lifelong habits. With many new online resources and tools for group buying discounts, couponing, and more -- it is easier than ever to build simple savings habits. It can even be as simple as considering the lifetime savings value of purchased items, such as using a home water filter versus buying bottled water.
Credit Score Basics
To help graduates understand credit scoring, Ms. Sullivan pointed out that there are three primary factors that make up the bulk of a credit score:
1. Payment History: an on-time payment history can account for approximately one third of a credit score. It is critical to build a prompt payment history -- even one late payment can torpedo your score and ruin years of good behavior.
2. Utilization: this means how much of the credit available to you is being used. It's important that you owe a little bit, but not too much, and that it be spread across different types of credit vehicles or even cards. The credit score bureaus want to see that you can use credit responsibly.
3. Length of credit history: credit bureaus want to see that you have a long credit history, and haven't secured a lot of credit recently. If you open up a handful of new cards at one time or a secured line of credit, you'll find that your score likely drops.
Credit Score Tips
Once graduates understand how a credit score is formed, these basic credit score tips from consumer money resource Bills.com can help them build or improve their current credit score.
About Bills.com
Bills.com is the leading resource for free and personalized money help. Founded by a group of financial experts intent on helping consumers save time, money and stress, Bills.com is designed to give consumers confidence in making money decisions. The site offers useful information, powerful tools, and real money experts to give consumers the information they need in the way they want it.
1Number of the Week: Class of 2011, Most Indebted Ever, Wall Street Journal, May 7, 2011, Mark Whitehouse
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