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Unemployed and Deeply in Debt College Seniors Face the Real World

Discipline and Planning Required to Stay in the Black


Provided by RBC Bank

As the class of 2009 graduates from college this May, they face the worst recession in the post World War II era and an unemployment rate that could hit 10 percent in the next year. If that wasn’t enough bad news, many newly minted grads are coming out of school with thousands of dollars in debt.

The average college student graduates with approximately $20,000 in student loan debt, according to the Project on Student Debt, and $2,200 in credit card debt, according to student loan provider Nellie Mae. A 2008 survey conducted by market research company, Zogby International, and TrueCredit.com, revealed that 23 percent of students have more than $5,000 in credit card debt and 10 percent graduate with credit card debt exceeding $10,000.

“With the unemployment rate in the South passing 8 percent [according to the Bureau of Labor Statistics], it is extremely important that college graduates understand how to pay down debt so that they are better prepared to enter this challenging economic environment,” said RBC Bank Chief Investment Officer Joe Keating. “Just about everyone is being careful with how they spend their money these days, and college graduates face the same challenges, if not more in some cases. However, there are things they can do to manage their debt, and we encourage them to do so proactively.”

So what can recent grads do when they find themselves drowning in debt and unable to pay rent and buy groceries, and with no hope of being able to save for a house or retirement? Here are a few tips on how to pay down debt:

  • Set a budget and stick to it. New grads need to examine their monthly expenditures and determine what expenses are needs and what expenses are wants. Set aside money to pay down debt and to cover expenses that are needs.
  • Work on paying off credit cards first. Credit cards have higher interest rates than student loans and should be the first debt to go.
  • Make extra payments. The graduation checks from family members, the birthday checks from mom and dad – put those toward credit cards and student loans rather than a trip to the mall or Best Buy.
  • Use cash, checks or debit cards for all purchases and payments. Studies show people are less likely to over spend when they use cash.
  • Live frugally. To save money, consider sharing living arrangements with friends or family; cutting back on cable television packages; using public transportation rather than owning a car if possible; trimming your monthly mobile phone bill; canceling the land line telephone; taking your lunch to work and eating more dinners at home; skipping the coffee shop espresso drink and go for the office java; using coupons; shopping at second-hand stores or consignment Web sites.
  • Take a second job. Consider taking a second job at night or on the weekends to speed up paying off debt. If jobs are hard to find, think about services you can provide for busy friends and neighbors like picking up dry cleaning, dog walking, babysitting, cooking and housekeeping.
  • Sell things you don’t need. The iPod, stereo or computer you aren’t using; clothes that you rarely wear; shoes and handbags that are cluttering your closets; furniture and home accessories you don’t have a place for – all of these items are great for local consignment stores or resale Web sites.

“The key is using credit cards wisely from the start,” said Keating. “For debt-free grads, using a credit card can actually be a smart financial move because it helps establish a credit history. The most important thing is simply paying the balance every month.”

This article is provided by RBC Bank. The information included in this article is not intended to be used as the primary basis for making financial decisions. Unemployment rate provided by the Bureau of Labor Statistics as of March 2009.

RBC Bank does not provide tax or legal advice.

About RBC Bank
RBC Bank, headquartered in Raleigh, N.C., offers a wide range of financial services and advice to individuals, businesses and public institutions throughout the Southeast. RBC Bank’s network includes more than 430 full-service banking centers, an extensive ATM network and telephone and online banking. RBC Bank is the 40th largest U.S. bank by consolidated assets, according to the Federal Reserve Statistical Release June 30, 2008. RBC Bank is a wholly-owned subsidiary of Royal Bank of Canada (RBC) (RY on the TSX and NYSE), Canada's largest and most stable bank as measured by assets and market capitalization. Global Finance Magazine named RBC the best bank in Canada in October 2008, and the safest bank in Canada for 10 consecutive years, from 1999-2008. RBC is also one of the world’s financial, social and environmental corporate leaders for the past eight years as on the Dow Jones Sustainability World Index. Additional information about RBC Bank may be found at www.rbcbankusa.com.

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For more information:
Dorsey Landis
RBC Bank/(919) 788-6272
Dorsey.Landis@rbc.com