Finding financial security after college

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    College graduates will walk across the stage in May, confident their education has provided them with the knowledge and wisdom needed to be successful in the future; however, there is one area in which young professionals are less savvy – consumer credit.Bud Hibbs, a consumer credit expert in Fort Worth, says the biggest problem facing recent college graduates and young people in general is ignorance.

    People coming out of college do not understand credit – such as credit cards, loans and how credit is determined – or what they should know, unless their parents have sat them down to detail the process, Hibbs said.

    Planning a budget may seem like a simple task, but too often, young Americans are finding themselves in a bind.

    Stan Block, Holder of the Stan Block Endowed Chair in Finance at TCU, says inexperienced young adults often stray from their budgets as a result of setting guidelines that are too rigid, or they plan a budget with too much wiggle-room, leaving temptations to end up in debt.

    Along with the excitement of graduating and having a real job with a salary come the desire and temptation to buy a new car, a house or simply spend these newfound dollars on frivolous items.

    A common pitfall many recent college graduates fall into is that they leave savings off their monthly budgets, or choose the route of investing, buy only one stock and put all hope in it, Block said.

    Many college graduates come out of school already in debt with student loans. Mike Scott, director of scholarships and financial aid at TCU, said in the spring of 2005, 941 students classified as seniors had a loan. In the fall of 2004, 2,169 students were registered as seniors. The numbers for only the spring 2005 semester were unavailable.

    Scott said that according to the state guarantee agency, which provides information on students holding federal loans, the average indebtedness of students holding loans at the time of graduation was $27,000.

    If you are concerned about your post-graduation financial future, you may have several questions. Here is how the experts answer common:

    How can I get a free copy of my credit report?

    1. Every person is entitled by law to a free credit report once every 12 months.

    2. Go to www.AnnualCreditReport.com to obtain your free copy.

    What should I know about credit cards?

    1. They are deliberately designed to entice you. Do not be fooled by advertisements, such as “2.9 percent guaranteed!”

    2. A college degree automatically puts you in a more elite crowd in the world of credit.

    3. You should never have more than three or four credit cards, and this includes gas cards.

    4. Shop around before signing up for a credit card. Interest rates vary and can be as low as 5 percent and as high as 20 percent.

    5. Make sure you know what the APR, or annual percentage rate, is.

    6. Credit cards should only be used to simplify transactions, such as paying bills.

    7. You should be paying credit cards off regularly and not expanding your bill by $1,000 or more each year.

    What should I know about my student loans?

    1. Student loans are perpetual – they will follow you forever!

    2. Never default on student loans – it can cost you up to 43 percent in penalty fees for defaulting.

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    4. Plan student loans into your monthly budget, but do not be too rigid. Make sure to leave yourself some money to play with.

    5. The payment period for student loans is 10 years; however, that may be extended in some cases.

    6. The interest rates on student loans are some of the best you will ever find!

    – Information provided by Stan Block and Bud Hibbs.