A Post-College Debt Scenario

Posted by: Meredith K. | Jan 16,2008


I’ve written a number of blog entries about how college students should handle credit card applications and credit card bills.  I’ve written other posts aimed at parents who need to know what their children face as their headed off to school.  I want to cover the gamut re: credit cards and college, but these posts are mainly aimed at those in college or soon to enter college.  

As this is the “Recent College Grad” section, I want to write some posts specifically aimed at those students who’ve recently graduated.  All of my info about not abusing credit during college may be for naught if you’ve already abused credit in college and are now out in the real world.  

Let’s look at a typical situation.  I’ll start with an undergraduate because grad school grads are in a different position in terms of earning ability.  These days a graduate degree has the value that an undergrad degree used to, as so many more students are getting a B.S., B.A., or similar degree.  The competition is much fiercer.  Still a non-grad school degree is common, so let’s start there.  

A student has recently graduated college with $2000 in credit card debt and $20,000 in student loan debt – the norm.  He gets a job in the $30,000 range, which is actually being very generous.  Many out-of-school jobs are in the $20,000 range.  Up front, you’re looking at probably $200-$300 a month for debt payments, if you keep those debts on the low end without paying too far above the minimum.  Let’s say you share an apartment and pay $400 a month.  Again, this is going to vary according to location, but I’m mainly talking about someone living in a larger city.  

Right now you’re looking at around $600 a month guaranteed.  Add to that food and some entertainment expenses and you’re looking at $700 a month, if we’re being very conservative.  Now add in car payments, car insurance, and utility bills, and I don’t think it’s out of hand to say your expenses are going to be around $1000 a month.  For a low starting income, that’s going to be a huge chunk of your daily take-home.  

The good news is that it still leaves money over for savings.  In the case of a $20,000 paycheck, you’ll have $600 left over at the end of the month, a pretty healthy sum.  So all isn’t dire.  What you can’t do is spend that money unwisely.  You should save it in addition to using some of it to pay off your debts more aggressively.  I have to stress that you’re expenses could be well above the figures I’ve given, but probably not less, so you’re going to have to set a tight budget if you want to save money every month.  

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