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Prioritizing your debt repayment after college

If you are among the millions of recent college graduates who are swimming in debt after leaving school, you may be wondering about the best strategy for repaying your student loans. Even though these debts do not qualify as consumer debt, they can cost you your well-cultivated credit score. In order to rebuild your credit, you may need to prioritize certain debts as you launch into your professional career.

It is important to note that recent statistics show that about 70 percent of students are emerging from their undergraduate education with more than $35,000 in debt. These debts include federal and private student loans, along with credit cards and money owed to family members and friends. This is a critical time for developing good credit, as grads are building the foundation for the remainder of their financial lives. Grads need good credit in order to rent an apartment, apply for utilities, and even obtain cable or Internet access at their homes. It is critical to maintain your financial health so your credit score does not hold you back from important life goals.

Grads can start fixing their debt problems by creating an itemized budget for each month. When every dollar is assigned to a fixed category, earners are more likely to stick to a plan rather than breaking through boundaries. A commitment to living within your means is required in order to repay your debts. Consider your long- and short-term financial goals when you are working to create your debt repayment plan.

So, which debts should you pay off first? Experts say the plan should focus on eliminating high-rate debts while making minimum payments on all other accounts. Private student loans are far more critical than their publicly funded counterparts. Consider also your personal spending preferences and motivation; if you are more likely to find satisfaction from paying off all smaller debts first, focus on that goal.

If you are faltering under the weight of your debts, including student loans, consider seeking the assistance of a qualified Washington, D.C., bankruptcy attorney. These professionals can help you learn more about getting your credit back on track through a variety of options.

Source: www.foxbusiness.com, "How grads should prioritize their debt repayment" Emily Driscoll, Jul. 15, 2013

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