The New Grad’s Guide to Staying Out of Debt Part 1

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As soon the mortarboard goes airborne, life for a college graduate is never the same. School’s out and for most that means repaying student loans, renting a first apartment and experiencing other new (and expensive) trappings of young adulthood. Think Econ 101 taught you enough about finances? The school of real life might inform you otherwise.

“When young people come out of the ‘cocoon’ of college, they usually have no idea how much it actually costs to live,” says Christine Hassler, life coach and author of 20 Something Manifesto. “All of a sudden they are faced with things like health insurance, taxes, car payments, higher rents and other costs that come with 'the real world.'”

For some the "real world" will mean cashing a signing bonus and picking out new suits, for others, packing up mom’s minivan and moving back to their childhood bedroom. But no matter where you and your diploma are headed, MainStreet has your two-part roadmap to financial well-being.


UPGRADE THE STUDENT CHECKING ACCOUNT

Most undergrads keep their money in a student checking account but don’t realize that once their university no longer recognizes them as a student, neither will the bank. Here are some of the most popular banks and their policies for post-grad student checking accounts:

Bank of America (BAC): After graduation, a CampusEdge student checking account is converted into a MyAccess checking account but the monthly fee is waived for the first 12 months.

Chase (JPM): Two months before graduation Chase will send you a notice that you’ll be switched to a standard checking account with a $6 monthly fee (unless you have a direct deposit into your account after graduation).

CitiBank (C): After your expected date of graduation, your account will be converted into a standard Citibank account which bears a $9.50 monthly charge unless you have a minimum of $6,000 in combined Citibank accounts.

Wachovia (WB): Nothing happens; the customer would remain in the student designated account until the student makes the switch.

Wells Fargo (WFC): Two months before graduation, a student-checking-account holder receives notice that the account will be switched to a free checking account after graduation.


GET ON A BUDGET
Create an itemized budget with all your expenses. “Include everything from the obvious charges like rent to the more conspicuous charges like the round of drinks you buy at a friend's birthday party,” says Hassler. “Get on a budget ASAP and force yourself to live by it.” Also, fully calculate what your paycheck will look like after taxes and health benefits are deducted before you commit to renting an apartment, joining a gym, or scheduling a vacation, adds Tory Johnson, founder and CEO of Women for Hire. The actual cost of living may come as a surprise.


PAY BACK YOUR LOANS
Two-thirds of students borrow money to pay for higher education, according to Sandy Baum, a senior policy analyst at the College Board. In 2003-04, the median amount of loan debt for a student who received a bachelor’s degree from a public college was $15,500. For a bachelor’s degree at a non-profit private college, that student is $19,500 in debt. Fortunately, federal student loans—such as Stafford, Perkins and PLUS loans—have a six month grace period before you must start paying them back. “Mark your calendars so you know when your grace period on your student loan expires,” says Beth Guerard, spokeswoman for Sallie Mae (SLM).


What about credit reports, benefits and money clubs? Click back to MainStreet for Part 2 later today!

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