Along With Diplomas and Dreams, Today’s Graduates Face the Future in Debt
I.I.I. Offers Financial Tips to Help College Graduates Manage Debt and Build Good Credit
INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org Washington, D.C.: 202-833-1580
NEW YORK, May 28, 2008 - With a sagging economy and an increasing cost of living, today’s college graduate is taking on increasing amounts of student loan and credit card debt, according to the Insurance Information Institute (I.I.I.).
Of the 1.5 million students receiving college degrees this spring, an overwhelming majority will have at least one credit card in their wallet and 32 percent of students will have four or more credit cards, based on a 2005 study done by student lender Nellie Mae.
According to the U.S. Department of Education, nearly 25 percent of college students may be relying on credit card debt to help finance their tuition. On average, by the time they complete their bachelor’s degree, students will be $19,300 in debt from student loans and credit cards. Twenty-three percent of students from private nonprofit colleges and 14 percent from public four-year colleges will graduate with $30,000 or more in debt.
“Learning how to manage student loans, credit cards and other debt is more important than ever before for college students,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “Establishing good financial skills early on and working to build a good credit standing will affect their lives in a surprising number of ways both now and in the future.”
Sally Greenberg, Executive Director of the National Consumers League, pointed out that young people are frequently unaware that their bill paying history will affect their credit history. “Many graduates don’t think they need to worry about their credit score until they need a mortgage to buy a house,” cautioned Greenberg. “It can come as a shock when they find out that employers routinely access credit scores as part of the application process.”
Good credit can help savvy graduates save money in a number of ways:
Applying for a Job Potential employers routinely check a person’s credit history as part of the hiring process. With many applicants vying for the best positions, a solid credit history may provide a competitive advantage in the job market.
Renting an Apartment Landlords will generally rent to the person or couple with the best credit history. In many urban areas, available housing is at a premium. Those with a good credit history will more easily find an apartment to rent and may avoid a larger security deposit and/or the need to have the lease co-signed by a parent or employer.
Signing up for Utilities Local phone, cable, electric and gas companies will waive cash deposits for those with a solid, established credit history.
Securing Loans With a better credit history, it is easier to get a car loan or mortgage, often at a more competitive rate.
Purchasing Auto or Homeowners Insurance Increasingly, insurers are using credit-based insurance scores to decide who gets auto and homeowners coverage and how much they pay. All else being equal, a person with a good insurance score can get a 15 percent discount on homeowners and auto insurance, which translates into about $250 a year.
“An insurance score is different from a credit score,” explained Salvatore. “An insurance company uses credit information, together with your driving record and insurance history, to predict whether you are more or less likely to file an auto or homeowners claim. This allows insurers to provide insurance to more people and to offer it at a lower cost. This can be important to college grads since they are part of a group that generally pays more for auto insurance.”
The I.I.I. suggests that graduates work to build a positive credit history in the following ways:
Use credit responsibly It is important to establish a good credit record while in college. The longer and more stable your credit history, the higher your credit score. Do not keep more credit cards than you need and or use more than 30 percent of the credit that you have available to you on your credit cards. Use cash instead of plastic whenever possible, and try to pay off your credit card balance in full every month.
Set up a budget and stick to it As a graduate, you should sit down and determine exactly how much money you are earning and how much you owe. Too often people make financial decisions based on how much they think they will earn, rather than what they are currently making. Many graduates also underestimate the cost of day-to-day living—try writing down all your expenses for a month or two to get a realistic sense of what you are spending, and where you may be able to cut back if necessary.
Pay bills on time Pay all of your bills on time every time even if that means automating your payments to ensure you are never late. This will help to build a strong credit history. A pattern of late payments not only lowers your credit and insurance scores, but late fees and interest payments can add up and make it harder to pay down the balance.
Keep in touch with creditors Graduates are often in transition, so once credit accounts are opened, let your financial institutions know if you are moving. You want to avoid having a credit card bill that was lost in the mail affect your credit record.
Monitor your Credit Report Check your credit reports at least once a year. If there are mistakes, get them corrected quickly. If your report is less than stellar, take positive steps to improve your credit standing.
The I.I.I. is a nonprofit, communications organization supported by the insurance industry.
I.I.I. Offers Financial Tips to Help College Graduates Manage Debt and Build Good Credit
INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org Washington, D.C.: 202-833-1580
NEW YORK, May 28, 2008 - With a sagging economy and an increasing cost of living, today’s college graduate is taking on increasing amounts of student loan and credit card debt, according to the Insurance Information Institute (I.I.I.).
Of the 1.5 million students receiving college degrees this spring, an overwhelming majority will have at least one credit card in their wallet and 32 percent of students will have four or more credit cards, based on a 2005 study done by student lender Nellie Mae.
According to the U.S. Department of Education, nearly 25 percent of college students may be relying on credit card debt to help finance their tuition. On average, by the time they complete their bachelor’s degree, students will be $19,300 in debt from student loans and credit cards. Twenty-three percent of students from private nonprofit colleges and 14 percent from public four-year colleges will graduate with $30,000 or more in debt.
“Learning how to manage student loans, credit cards and other debt is more important than ever before for college students,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “Establishing good financial skills early on and working to build a good credit standing will affect their lives in a surprising number of ways both now and in the future.”
Sally Greenberg, Executive Director of the National Consumers League, pointed out that young people are frequently unaware that their bill paying history will affect their credit history. “Many graduates don’t think they need to worry about their credit score until they need a mortgage to buy a house,” cautioned Greenberg. “It can come as a shock when they find out that employers routinely access credit scores as part of the application process.”
Good credit can help savvy graduates save money in a number of ways:
Applying for a Job Potential employers routinely check a person’s credit history as part of the hiring process. With many applicants vying for the best positions, a solid credit history may provide a competitive advantage in the job market.
Renting an Apartment Landlords will generally rent to the person or couple with the best credit history. In many urban areas, available housing is at a premium. Those with a good credit history will more easily find an apartment to rent and may avoid a larger security deposit and/or the need to have the lease co-signed by a parent or employer.
Signing up for Utilities Local phone, cable, electric and gas companies will waive cash deposits for those with a solid, established credit history.
Securing Loans With a better credit history, it is easier to get a car loan or mortgage, often at a more competitive rate.
Purchasing Auto or Homeowners Insurance Increasingly, insurers are using credit-based insurance scores to decide who gets auto and homeowners coverage and how much they pay. All else being equal, a person with a good insurance score can get a 15 percent discount on homeowners and auto insurance, which translates into about $250 a year.
“An insurance score is different from a credit score,” explained Salvatore. “An insurance company uses credit information, together with your driving record and insurance history, to predict whether you are more or less likely to file an auto or homeowners claim. This allows insurers to provide insurance to more people and to offer it at a lower cost. This can be important to college grads since they are part of a group that generally pays more for auto insurance.”
The I.I.I. suggests that graduates work to build a positive credit history in the following ways:
Use credit responsibly It is important to establish a good credit record while in college. The longer and more stable your credit history, the higher your credit score. Do not keep more credit cards than you need and or use more than 30 percent of the credit that you have available to you on your credit cards. Use cash instead of plastic whenever possible, and try to pay off your credit card balance in full every month.
Set up a budget and stick to it As a graduate, you should sit down and determine exactly how much money you are earning and how much you owe. Too often people make financial decisions based on how much they think they will earn, rather than what they are currently making. Many graduates also underestimate the cost of day-to-day living—try writing down all your expenses for a month or two to get a realistic sense of what you are spending, and where you may be able to cut back if necessary.
Pay bills on time Pay all of your bills on time every time even if that means automating your payments to ensure you are never late. This will help to build a strong credit history. A pattern of late payments not only lowers your credit and insurance scores, but late fees and interest payments can add up and make it harder to pay down the balance.
Keep in touch with creditors Graduates are often in transition, so once credit accounts are opened, let your financial institutions know if you are moving. You want to avoid having a credit card bill that was lost in the mail affect your credit record.
Monitor your Credit Report Check your credit reports at least once a year. If there are mistakes, get them corrected quickly. If your report is less than stellar, take positive steps to improve your credit standing.
