10 May Help Your College Grad Get Their Money House in Order
It’s May and college graduations are springing up all over, just like summer flowers! We hope that more colleges will be able to hold in-person celebrations this year for the students who persevered through all the distractions thrown at them during the pandemic. Congratulations on a job well done, and I wish you equal success in all your future endeavors. You have certainly earned it.
Parents of new grads have a right to celebrate as well for getting their students to this point, but there might be one last lesson you can impart to give these new adults a leg up on the road to future financial strength. Here are some points that will help your college grad get their money house in order:
- Student Loans: Grads usually have a grace period of six months to begin the repayment process after they leave college. A lot changed during the pandemic, and there is still some talk about canceling a certain amount of federal student loan debt. Currently the Student Loan Payment Pause has been extended through August 31, 2022, which means your student will be expected to begin payments in the fall, unless it is extended again. No official decisions have been made about forgiveness, so plan for now on repaying the full amount. These actions do not apply to private student loans, so your student will have to check with each servicer to determine their current stance.
- Calculate Debt Amount: Your student will still be required to complete exit counseling about repaying their federal student loans. The purpose of exit counseling is to ensure students understand their student loan obligations and are prepared for repayment. Take time to learn about the types of repayment plans available, and possible forbearance options in case the pause is not extended. Students may be surprised at the total amount of debt they have accumulated during their college years, so they might need a parent’s helpful guidance sorting through it all.
- Watch Out for Quick Purchases: Leaving college can be so freeing that many new alums go right out and make major purchases based on their anticipated lifestyle options. They should be aware, however, that job opportunities may fall through, moving costs could be higher than anticipated, and the price of everything is going up dramatically lately. Purchasing a shiny new car might be tempting, but it might not be a good idea right out of the gate. It is best to settle into a new life and look at all of your expenses, so you can determine whether a big expenditure is really in the budget.
- Beware of Credit Cards: Using credit to finance post-college dreams might seem like a good idea, too, but it is possible that those interest rates could increase as well, helping students dig a deeper credit hole before they even settle into their new life.
- Set a Budget: Some students may choose to live at home for some time after graduation, but those who go out on their own are often unaware of just how much that can cost. Give your student one last money lesson on paying for cell and data plans, meal costs, rent/mortgage expenses, daily commute costs if applicable, buying any needed work wardrobe, and the ordinary expenses of life. Help set up a budget that estimates planned income after taxes, and projects all expenses including student loan payments.
For new students attending college this fall, if you have already made your college choice and loans are part of that picture, CFAA offers loan appointments in May to help in the final decision-making process.
Remember that CFAA helps with every step of the financial aid process, from completing the FAFSA and completing the CSS Profile to comparing financial aid offers and understanding student loan options. Rising seniors can set a CFAA new client free strategy session or a 15 Minute Power Chat to learn about finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my weekly JustAskJodi emails and check out my monthly CFAA e-newsletter