Michelle Singletary’s The Color of Money: A sure-fire way to pay off student loans

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WASHINGTON — I was teach­ing about the dan­gers of debt at my church re­cently when a new col­lege grad­u­ate asked me the same ques­tion many do.

“What can I do about my stu­dent loans?” she asked.

“How much do you have?” I asked.

I flinched when she said about $25,000.

It’s still early for spring grad­u­ates to feel the weight of their debt. Many with fed­eral Staf­ford loans won’t have to start their re­pay­ments un­til af­ter their six-month grace pe­riod is over, which is the time bor­row­ers are given when they don’t have to make loan pay­ments af­ter grad­u­at­ing, leav­ing school, or drop­ping be­low half-time sta­tus. Those with pri­vate loans may also have grace pe­ri­ods.

I think of stu­dent loans as the cock­roaches of debt. The loans are hard to get rid of be­cause for so long peo­ple were told this was good and nec­es­sary debt and so it wasn’t a bad thing to have it hang around for de­cades.

When peo­ple ask me about what they should do about their stu­dent loans, I ask: What are you will­ing to do to get rid of them as fast as you can?

And here’s my sug­ges­tion: Live for as long as you can with your par­ents, rel­a­tives or any­one who will al­low you to stay rent-free or charge you a su­perlow rent.

If you are look­ing for strat­egy to pay off your stu­dent loans, look at your hous­ing ex­pense. It’s usu­ally by far the big­gest bud­get item, tak­ing up 30 per­cent to 40 per­cent of many peo­ple’s bud­gets.

Dur­ing the talk at my church, I asked an­other young woman with stu­dent loans who was liv­ing in an apart­ment if she could move back home. She said she lived near her father.

Great. Give up the apart­ment and move in with him, I told her.

She looked like I had slapped her. Many in the con­gre­ga­tion mur­mured their dis­ap­proval of my sug­ges­tion.

Really, why is this so out of the ques­tion?

We are so quick to push young adults out on their own on the prin­ci­ple of teach­ing them per­sonal re­spon­si­bil­ity. And many want their in­de­pen­dence. But when young adults are bur­dened with stu­dent loans, giv­ing them an op­por­tu­nity to live at home isn’t en­abling bad be­hav­ior. It’s giv­ing them a chance to start their in­de­pen­dence debt-free. How­ever, make sure, in ex­change for no or low rent, they are liv­ing fru­gally so they can de­vote as much of their in­come as pos­si­ble to get­ting rid of the loans.

Do it my way and when they fi­nally launch, they won’t have to re­launch. They won’t have to come back home be­cause they couldn’t han­dle all the ex­pense of liv­ing on their own plus the heavy bur­den of stu­dent loans.

Bank­rate.com has a cal­cu­la­tor that lets you choose a per­cent­age of your sal­ary as pay­ment on your stu­dent loans. On the site, search for “How long will it take to pay off my stu­dent loan?” When you in­put your sal­ary in­for­ma­tion, be sure to use your net pay rather than your gross sal­ary.

So let’s take the stu­dent ow­ing $25,000. If the in­ter­est rate on her loans av­er­aged 6 per­cent and her net yearly in­come was $30,000 and liv­ing with her father rent-free en­ables her to de­vote 30 per­cent of her in­come to pay­ing off her loans, she would be debt-free in three years and one month. Boost her pay­ments to 40 per­cent of her take-home sal­ary and she would be debt-free in a lit­tle more than two years.

If you don’t live near rel­a­tives or friends will­ing to let you live rent-free, look for peo­ple rent­ing a room in their house. If you have to get an apart­ment, get as many room­mates as you can.

“I need my space,” an­other debt-laden grad­u­ate said.

OK, then live with the debt.

Too harsh, you think?

I don’t think so, es­pe­cially when I see folks who had their space in their younger years and are now well into their 40s, 50s and even 60s and still sad­dled with stu­dent loan debt.

Michelle Single­tary can be reached c/​o The Wash­ing­ton Post, 1150 15th St., N.W., Wash­ing­ton, DC 20071 or at mi­chelle.sin­gle­tary@wash­post.com


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