On Wednesday, I talked about the number of college students now carrying thousands of dollars in credit card debt. Combined with student loan debt that has reportedly reached about $870 billion, millions of college graduates leave school with extensive financial liabilities.
On April 12, 2012, Business Insider published the story of one student who “graduated from journalism school with a master of arts, new friends from around the world … and a decade’s worth of student loan debt.” Laura Shin said, “I had somehow managed to reach my mid-30s without having a clue how to manage my finances.”
After graduating with “just” $20,500 in May 2008, Shin said that two years later she was $6,500 in credit card debt and $18,432 in student loan debt. That September, she said she “figured out that, depending on how fast I wanted to pay my loan and amass savings, I had to live on between $190 and $240 per week. In cash.”
Shin said she immediately stopped all credit card spending except for items she could only buy online. While Shin’s budget had an impact on her social life, a gift of “several thousand dollars” from her parents that they wanted her to put toward her student loan debt was used to pay off the credit cards. By February 2011, she was free of her credit card debt.
Shin said she was told that she needed to build an emergency fund, but when she received her bonus in late January, she “immediately sent a payment in the same amount to the lender” before taking “a massive amount” out of her savings account. In February, she “quietly logged onto the student loan website while at work” and made her final payment.
“It wasn’t until a full month passed and I received a paper letter from the lender showing that I owed nothing, that I finally—finally—breathed a full sigh of relief,” Shin said. Her story certainly shows the benefits of making a budget and sticking to it. Admittedly, not every college graduate gets a gift of “several thousand dollars” from his or her parents, but putting an end to the reckless spending on credit cards is always an effective way to stop the vicious cycle of debt. While student loans are rarely discharged in Chapter 7 or Chapter 13 bankruptcy, most or all of your credit card debt can be. Whether you are a college graduate or not, if your credit card bills have seemingly made it impossible for you to create a budget to live on, contact my office to see how I can help.