By Natasha L. Foreman, MBA
I read the article (below) and I’m not sure if I agree with the steps and suggestions. Or maybe I just read it incorrectly.
Upon graduation, if a person doesn’t already have a job I think they need to hurry and get one, and then begin working a plan that will help you to save and pay off your debt. People should budget to save 10-15% to repay student loans, 10-20% of their earnings for emergencies, 10% for tithing or other donations, 10-20% for investments (which includes saving for that first home), 10% just to save (for something special), and use the rest towards their bills and living expenses. Whatever is left, they should invest in their emergency fund or use towards a vacation fund.
Their biggest debt upon graduation will be their student loans, and 6 months after crossing that stage their lender(s) will be calling and flooding their mailbox with letters. Even if they get a deferment or forbearance, I don’t recommend saving money for large purchases without first allocating funds for loan repayments. Why put yourself further in debt?
Additionally, if the graduate ever defaults on their student loan(s) how do you think that will negatively impact the money they have stashed away in their bank account or retirement plan? How will it affect their credit, and their ability to take out loans of any kind in the future? Could that default cause a domino effect that could lead to a lien, seizure of property, or other traumatic situation?
With more student loans being taken over by the federal government I would caution students and new grads from taking a casual approach to repaying their loans. We have been warned not to play with the IRS, I would also add, don’t play with federal student loans—there’s no where to hide!
Read the article in its entirety here and then share your thoughts: http://www.techyville.com/2013/07/news/which-do-you-do-first-save-money-or-pay-off-student-loans/
Copyright 2013. All Rights Reserved. Natasha L. Foreman.