6 Steps to Move From College Debt to Financial Success

Building Black Wealth: Following these principles will help college grads build a firm fiscal foundation.

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Editor’s note: This is part 2 in a five-part series on growing and maintaining wealth. Read part 1.

I grew up thinking that a college degree would be my ticket to wealth or at least entree into the upper echelons of the middle class. After spending most of my 20s digging my way out of $65,000 worth of student-loan and credit card debt amassed after completing a bachelor’s degree in political science and master’s degrees in both bilingual education and organizational leadership, I realized that the correlation between a college education and wealth-building was a pretty weak one.

While my credentials positioned me to earn more—my income nearly tripled from my first degree to the third—my degrees did not position me to save more, invest more or improve my credit; only strong money-management skills positioned me to do that. And those skills were acquired over the course of my 14-year journey toward financial freedom.

Here are six wealth-building strategies and principles that I applied to build my financial foundation. Use them to build yours.

1. Get organized and knowledgeable about your student loans. Part of being a college graduate is being responsible and informed about your student loans. Take several weekends to educate yourself on the ins and outs of your student loans. Create virtual and/or real folders to organize the following information.

  • The type and number of loans that you have. Do you have subsidized and/or unsubsidized loans? Do you have federal loans, private loans or both? Keep the name and number of your lender or lenders in your phone, on an Excel file on your computer, and as a hard copy for easy access.
  • The exact cost of your loan(s). You need to know how much money you owe and the amount that is accrued monthly to the penny so that your efforts to eliminate debt are grounded in accurate numbers instead of approximations.
  • Your options for loan repayment. Have you educated yourself on the various federal loan-forgiveness programs, the Pay As You Earn repayment plan, or the discounts applied to student-loan payment agreements that elect automatic withdrawals from your checking or savings accounts? Researching these options can save you hundreds, if not thousands, of dollars on your student-loan payments.
  • The life of the loan in years. How long will it take to repay your loan if you only make the minimum payment? How long do you want to carry this debt? There are opportunity costs for prolonging the repayment process; extending the life of your loan or loans can delay the purchase of your first home, starting a family or new business, paying for a wedding, or quitting a job.

2. Live at home for as long as you can. Without the burden of high rent prices, you can start to build a six-month emergency fund, save to buy your own home, make a big dent in your college loans and allow for more risk taking. With this safety net, you can say yes to low-paying, high-passion opportunities, entrepreneurial ideas, internships and travel opportunities, thus preparing you for bigger, greater and more meaningful long-term gains.

On the other hand, if living at home is not an option, scout out neighborhoods and cities that will eat up less than 30 percent of your total take-home pay. This may mean having to share your space with roommates to keep your costs low and shop sparingly for home furnishings.

3. Understand that everything has diminishing returns, including education. This may be a hard pill to swallow, especially, since we, as African Americans, have been historically and systematically locked out of access to higher educational opportunities, but pursuing graduate studies for the sake of pursuing graduate studies or “enriching” your life is a waste of money if you are not clear about the financial returns on that investment and if you are already knee-deep in debt.

If you are committed to lifelong learning, consider a certificate course, self-study or one of the many low-cost or free online opportunities that some of the most prestigious colleges and universities offer, until you are 100 percent certain that you need that second or third degree.

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