DUBUQUE – With graduation right around the corner, students may be wondering how they will pay off their student debt, when they should start a retirement plan and how they will afford to do both. Zach Little, a 2012 Loras graduate, advises students to get used to living on a tight budget.
“If you can live tight for the short term, it’s really going to pay off because you are going to save thousands of dollars in interest,” he says.
Zach adds that in order to pay those student loans off, recent grads might have to continue, “Living a little tight, maybe on some ramen or something.”
Since 73% of students borrowed last year at Loras and had an average federal debt of $27,000, living on a ramen budget is what many students have to do in order to pay their debts off.
CNN Chief Business Correspondent Christine Romans seconds Zach’s advice on continuing to live like a student even after graduation. She tells students that, “15% is going to go towards paying off your debt, 85% is what you are going to live on. So you’ve got to keep the expenses down.”
In order to keep expenses down, Romans suggest that students live at home with their parents after graduation if possible.
“If your parents live in the town where you are, live at home for a year and put all of what you would’ve put to rent, put it to your students loans.”
Students should also look into the different payment plans options that are available to them once they start making payments.
“There are fixed plans, there are graduated plans where you pay less at the beginning, more later. There are plans that you can do with your lender where you pay a percentage of your income,” Dr. Eller, Associate Professor of Finance, explains.
Even while paying debt off, students need to remember to invest their money into a retirement plan.
“Even if you are paying down student loan debt you can be investing in a 401(k). If your company offers a 401(k) when you get a job, take it. Take it and max it out,” Romans stresses to students.
And if your employer offers to match any contributions you make towards your retirement plan, do not turn that down.
In order to pay off your debt and to start a retirement plan, Dr. Eller stresses the importance of saving. He says simply, “Save as quickly as you can, as much as you can, as often as you can.”
And don’t forget Zach’s advice, either: a ramen budget now will you make your future richer.
Allison is a senior at Loras College and is a Dubuque native. She's the Producer of LCTV News, along with Payton Van Vors, as well as an anchor and reporter. This past summer, Allison had an internship with KCRG in Dubuque, and she's continuing to work for them this Fall. Allison reports because she loves keeping her community informed on issues and events that matter to them.