Although student loan debt is a much greater problem in the United States than credit card debt, the two almost always go hand-in-hand. Approximately 76 percent of student loan borrowers also carry credit card debt. Student loan debt has reached an enormous rate, currently at $1.23 trillion, while credit card debt across the country has reached $733 billion. An average American household carries approximately $48,000 in student loan debt and $16,000 in credit card debt, according to NerdWallet. A significant amount of debt is likely to cause financial stress and has been linked to problems in the workplace, in marriages and various health problems.
It can take many years to pay off the balance of both student loan and credit card debt. As a result, it is important to fully understand the financial ramifications of taking on these debts. Below are a few things to keep in mind:
Student Loan Debt:
- The total amount borrowed is extremely high by the time you graduate.
- It may be difficult to find a job upon graduation and most starting salaries for college graduates are low.
- Student loan debts are rarely discharged in bankruptcy.
- Monthly payments will likely be high due to the significant amount of debt borrowed.
- Deferments and forbearances are temporary solutions. Most student loan payments begin six months after graduation.
Credit Card Debt:
- Most credit card companies charge minimal payments, which can drag the debt out for many years.
- Interest rates and APRs can be exceedingly high.
- Balance transfers may only ease your debt slightly.
Once you have the debt, the next thing you need to know is how to manage it. Below are five tips to managing student loans and credit card debt.
- Figure out how much debt you have. It is more stressful to keep yourself in the dark when it comes to your total amount of debt. Contact your creditors, obtain your credit report and list all of your debts in a spreadsheet. This will give you more perspective and help you gain control over your debt.
- Create a plan. The next thing you need to do is create a budget that includes not only your debt, but also your monthly bills. If you are spending more than you are earning, you may need to find ways to make extra money or look for a second job. When creating your budget, it is important to not look too far into the future, this may cause additional stress.
- Prioritize one debt over the others. If you are like most Americans and have multiple types of debts, you may want to prioritize one type of debt. If you have credit card and student loan debt, this would likely be the credit card debt because this type of debt typically has a higher interest rate. This will help you save money in the long run. Don’t ignore your student loan payments; just try to devote more of your extra money toward paying off the loan with the higher interest rate.
- Explore your options. There might be options for your debt that will alleviate some of your stress such as refinancing your student loans into one consolidated private loan with a lower interest rate. You might also be able to transfer your credit card balances to one single card with the lowest interest rate.
- Seek Financial and Personal Help. If your debt is so high that you can’t make ends meat, you may want to seek help from a certified financial planner, legitimate credit counseling agency or an experienced bankruptcy attorney.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.