An estimated 1.8 million college students will make up the U.S. class of 2017. The first few years — even the first few months — after college can feel like a financial land mine as graduates figure out how to manage their finances independently.
To give this graduating class a leg up, MagnifyMoney asked 1,000 recent college graduates to tell us what they wish they had done differently in those crucial years after graduation.
Among the most popular regrets were not being careful about debt/missing debt payments (48%) and not building their credit score up sooner (40%). One in five graduates also said they wished they had been better about saving money.
Missing a credit card or student loan payment even once can result in lasting credit score damage, and a lower credit score can make it difficult to get approved for new credit down the road.
Looking closely at the results of our survey, we can understand why so many college graduates may be struggling to stay on top of their bills — especially those who graduated with student loan debt.
Student Debt: A gateway to credit card debt
The vast majority of our survey respondents (61%) said they left school with student loan debt. On average, graduates with student loan debt said they carried $35,073.
We found some troubling trends among those with student loan debt. Not only are they more likely to say that they did not feel like they were better off their parents at their age, but they are also more likely to carry large loads of credit card debt.
More than half (58%) of graduates without student loan debt say they believe they are better off now than their parents were at their age. Graduates with student loans were less likely to agree with that statement. Half (52%) of college graduates with student loans say they are better off than their parents were at their age.
According to our survey, college graduates who left school with student loan debt were more likely to wind up in credit card debt down the road, as well.
- 59% of all college graduates reported having credit card debt.
- But 67% of recent grads with student loan debt report having credit card debt, versus 44% of those without student loans.
- 20% of recent grads with student loans report credit card debt of $10,000 or more, almost twice the rate of those without student loans (11%).
- And 24% of recent grads with $50,000 or more in student loans report having $10,000 or more of credit card debt.
2 in 5 will need longer than 10 years to pay off their student loans
A significant percentage of student loan borrowers expect to take longer than the standard 10 year repayment timeframe to pay off their loans.
- 40% of recent grads with student loans anticipate that they’ll need more than 10 years to repay their student loans. For context, the standard repayment period for federal student loans is 10 years, however, we did not ask survey respondents what type of loans they carried (federal or private).
- Among the grads who report more than $50,000 in debt, just 26% say they will pay off loans within 10 years. And 41% believe they will take more than 20 years, or never pay off their student loan debt.
- Among all student loan borrowers, 7% said they will “never” be able to pay off all the debt.
Optimism for the future
One thing graduates seem to have in common — whether they carry student debt or not — is a shared sense of optimism for their futures.
- 65% of grads without student loans feel they will be better off than their parents in the future.
- 64% of those with student loan debt also feel they will be better off than their parents.
Even among recent graduates with the burden of $50,000 or more in debt, 60% believe they will be better off financially than their parents in the future.
Those with Master’s degrees are most confident, with 68% saying they will be better off than their parents, versus 64% of Associate’s and Bachelor’s degree recipients.
Top 3 tips to manage debt after college
Know your options. If you are struggling to pay down your student loan debt, find out if you qualify for flexible repayment options like income-driven repayment plans. Students with high-interest student loan debt can consider refinancing to lock in a lower interest rate. Here are the top 19 places to refinance student debt in 2017.
Stay on top of your payments. Student loans will be reported on your credit report after you graduate. By making on-time student loan payments, you are already taking one of the most powerful steps toward building a solid credit score. If you fear you will miss a payment, contact your loan servicer right away. Even one missed payment can derail your credit score.
Build your credit score strategically. A 2014 study by MagnifyMoney found that the average college student will face credit card APRs of 21.4%. Carrying a balance with an APR that high can quickly lead down a long road of unmanageable credit debt. A simple way to build credit is to take out a credit card, charge small amounts each month and pay it off in full. To avoid relying on credit card debt, set money aside from your paycheck for emergencies.
MagnifyMoney conducted a national online survey of 1,000 U.S. residents with college degrees who reported completing their most recent degree within the last five years via Pollfish from April 26 to 30, 2017.
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