After graduation, many students experience some post-graduation consequences that are not much fun. The majority of 2016 college graduates found themselves approximately $37,000 in student loan debt and the average is growing. In addition, many college graduates have debt in other forms like; car loans and credit card debt. This is a list of common mistakes that can be very costly and should be avoided—or you could end up paying for it for years.
1. Deferring Student Loans
Temporarily stopping repayments for a student loan like the Free Application for Federal Student Aid (FAFSA) repayments may seem like a short-term solution. In reality, the longer a loan is deferred, the deeper in debt you become. The interest rate on some loans even increases.
2. Not Using A Grace Period
Taking advantage of a grace period is not the same as deferring payments. Lenders often grant a grace period for college graduates to begin repaying a loan. The grace period is typically six months. Do not ignore the payment that you will eventually be making. Instead, put the amount of the monthly payment into a savings account.
When loan payments begin, you will have an emergency fund in the bank and be in the habit of making the payment. The grace period gives you time to figure out a plan of attack for paying off loans. If making payments is going to be burdensome, you have time to explore other options. There are sometimes income-based repayment options available.
Failing to have a game plan for student loans is a mistake. If the debt is not handled correctly, it can severely impact your financial future. Determine what you owe and the interest rate on each loan. Extra payments on high-interest loans can save a lot of money. A loan payment made by automatic debit may qualify for a slight reduction in the interest rate that can save hundreds of dollars over the term of the loan.
3. Not Asking For Loan Forgiveness
Some student loans qualify for forgiveness. Student loan forgiveness is an opportunity to have loans entirely or partially forgiven. Loan forgiveness may be granted in exchange for:
- Volunteering
- Choosing a job in a specific location or field
- Military service
- Moving to a certain location
4. Paying Too Much Rent
Rent should be no more than 30 percent of your monthly income. Finding suitable housing can be a challenge because income and job opportunities seem stagnant while rent is continually increasing. This dilemma is the reason so many college graduates move back home with parents until they are more financially stable.
5. No Budget
Budgeting can be a daunting task. Start by tracking where you spend your money. Your expenses should include things like gas, groceries, and utilities. When you have a handle on expenses, budgeting and adjustments become easier.
Only about 30 percent of Americans actually budget. Budgeting can be difficult when there is little money to work with.
Landing a job can cause the temptation to indulge in things not feasible during college or spend money whenever you want, on whatever you want. But, purchasing extravagant items can start an endless spending cycle. Stick to the necessities. Save the money you would spend on wants rather than needs to use for a vacation, paying off student loans, or a down payment on a car.
Budgets help you stay on track financially. They can help you:
- Pay down debt
- Keep from making unnecessary purchases
- Start growing a savings account
6. College Lifestyle
Keeping late hours is not only expensive but affects your ability to perform the next day. After college, the focus should be on jump-starting a career.
Travel is often an after college goal that can affect the money you have available. College graduates have to realize that adult decisions have to be made. If bitten by the travel bug, do not go deeper into debt. Substitute saving money by going on a road trip for buying a pricey airplane ticket.
7. Not Saving Or Contributing To A Retirement Fund
Put something in savings every month. Your employer can make an automatic deposit from your paycheck if disciplining yourself to do so is difficult. If your employer has a 401(k) plan, take advantage of it. Many employers who offer a 401(k) plan match a portion of the contribution. That is free money.
8. Limits Placed On Job Searches
Refusing to accept or apply for a job that does not fit your passion or degree is a mistake. Limiting a job search also limits growth and income opportunity. There is definitely a correlation between the length of time spent waiting for a dream job and a dwindling bank account.
9. Meeting 100% of the Job Description
One of the most significant job search challenges is the job description. It’s likely that some listed qualifications can be taken with a grain of salt. The description is a wish list for hiring managers looking for the ideal candidate. Don’t apply for a job that is entirely out of your league, but meeting all the criteria is not necessary when applying for a job.
10. Poor Resume
Ninety-percent of large companies use Applicant Tracking Systems (ATS) software to scan resumes for keywords included in a job description. Resumes without keyword matches are automatically and immediately tossed from the pool of applicants. That means no one in charge of hiring sees them.
Make sure your resume is tailored to the job for which you are applying. Identify the keywords and phrases in the job description and include them in your resume.
11. Focus On Lack Of Experience
Hiring managers are aware that an applicant is a recent graduate. If you reach the interview stage, questions about your lack of experience can be expected. Do not apologize. It is a waste of time and makes you appear weak.
Go into an interview ready to let a potential employer know what you have to offer. Spend time before the meeting thinking about polished, high-energy, and inquisitive responses to questions about your lack of experience. Being inquisitive makes you stand out from other candidates.
Show the interviewer that you came because you are curious and want to learn. Being able to engage and participate in a conversation is likely what the hiring manager is looking for. Don’t discount work done in school, as an intern, or as a volunteer. You may have done some work in a solo or team setting that is related. Treat that assignment as relevant work experience.
12. Not Having Health Insurance
Health insurance is one of those things that college graduates are forced to think about and have to deal with. If an employer does not offer health insurance, you have to be covered under your parent’s’ policy or enroll in a plan of your own.
The Affordable Care Act mandates insurance companies to extend the coverage of adult children until they are 26 years old. It is wise for parents to contact their insurance provider to ensure you are covered. The average cost of a hospital stay is a little over $33,000. The number one reason people in America file bankruptcy is due to medical debt.
It is an unexpected expense that can be financially devastating. Saving what you can, where you can, and being willing to start at the bottom of the food chain are the things that will pay off in the long run. Be your own best advocate. Make wise choices that will impact your future and you’ll be assured a brighter future.