10 Personal Finance Challenges NJ Millennials are Facing

According to a recent survey done by Credit Karma, 61% of millennials said money was their #1 source of daily stress. Having grown up or entered the workforce during the Great Recession, millennials face some unique financial challenges. Even rising wages cannot keep up with the ever-increasing cost of living for this group of young consumers. When it comes to personal finance, NJ millennials face a number of burdens specific to their generation.

1. Higher Than Ever Student Loan Debt

Crushing student loan debt is so universal to the experience of millennials that it has spawned countless think pieces, endless memes, and has even influenced national political campaigns. The average student loan debt per graduate is $17,126 according to Business Insider. The number of students taking out loans to pay for college has increased by 10% since 2000 and students are borrowing more money now than ever before to afford their education. This kind of debt means millennials are often entering the workforce with major deficits.

2. Saving for a House Takes Longer

As home prices continue to climb, millennials buying homes today will pay an average of 39% more for their first home than baby boomers did. Home ownership for millennials is at an industry low as millennials avoid taking on more debt and spend years saving up for that 20% down payment. Buying a home has become less of a next step and more of a dream for millennials. This is true of many “milestones” ranging from buying a car to getting married and having children.

3. Living Paycheck to Paycheck

Besides struggling with more debt and higher costs of living than previous generations, millennials are also often unemployed or underemployed. 44% of recent college graduates report struggling to make ends meet with dead-end and low paying jobs. Making enough money to get ahead of their expenses is increasingly difficult. The “side hustle” has become a way for millennials to use their skills to make money to supplement their regular income, but even with a supplemental income, millennials continue to struggle to build wealth.

4. Caring for Elderly Parents

Despite earning less, millennials are spending much more on care for aging parents than previous generations. On average, millennials who pay for elderly care spend 27% of their income on care services. This is coupled with the fact that many millennials (53% according to the Country Financial Security Index) have had to receive financial assistance from parents or family members since turning 21. This generation is ill prepared for the burden of caring for elderly parents.

5. Poor Planning for the Future

Too many millennials have little or no savings, struggle with being un-insured or under-insured, and tend to put off retirement planning. Most millennials are only saving on average 5.3% of their income. Even if millennials are working towards the suggested $1 million retirement savings, things aren’t looking good for them. Based on inflation rates, $1 million dollars today will have the spending power of $306,000 in 40 years. These numbers mean many millennials will be facing poverty level finances in their golden years.

6. Ignoring Credit Scores

Many millennials don’t pay attention to their credit score until they need it to buy a house, a car, or to get a personal loan. It can be easy to ignore your credit score, and many generations struggle with bad credit. But for millennials, who are already dealing with higher debt and younger credit histories, it is especially important to spend some time working on building better credit. Good credit can be the pathway to making some of those sought-after big purchases millennials keep putting off—like buying a house.

Are you a millennial? Share in the comments what financial hurdles you’re experiencing, especially if it wasn’t mentioned in today’s post.

Getting Savvy About Your Student Loans

student loans

You did it! You got the degree, graduated college, and are ready to branch out into your career. Graduation is a time to look forward to your bright future after years of hard work. But it’s also worth taking a look back—especially at your student loans. Many college students graduate without really knowing how much they owe, when payments are due, or even who they owe. How long will these loan payments be in your life? Organizing your student loan debt is a big first step towards your bright future after graduation. Here are six steps you can take to get on top of your student loan debt.

1. Who do you owe?

Are your loans federal or private? This is a good time to figure that out. Most college students have some kind of federal student loan debt. Go to studentloans.gov and enter your FAFSA information to see what loans you have and to find the government-hired company that services the loan. This will be the company you contact for all future interactions concerning your loan.

If you have private student loans this can be a little more difficult to track, especially if you weren’t exactly the world’s most organized filer when you were 17 years old. Your loan(s) also could have been sold to a completely different company than you initially used. In these instances, your college admissions office should be able to lend a helping hand. Your alma mater should have a copy of any loan agreements with your records that can tell you who your loan servicer is. Your credit report can also help you determine information about any private loans.

2. How much do you owe?

This is really a two-fold question: What is the amount you initially borrowed and what is the current amount of principal you owe? If you have been making some payments towards your loan, it is important to find out if these payments went towards the principal of your loan or if they went towards interest. Federal student loan balances are frequently not up to date, so contact the lender directly for the true amount of your loan. Private student loans should be up to date with your most recent statement, but it never hurts to make direct contact if you have any questions about what you owe and what you’ve already paid.

3. What is the interest rate?

Knowing which loans have higher interest rates can help you determine which loans should take priority as you begin repaying your debt. All federal loan interest rates after 2006 are fixed, meaning the rate remains the same over the duration of the loan. Private student loans as well as federal loans taken out prior to 2006 may have variable interest rates. Find out how often the rate changes and if there is a cap on how high the rate can go. If you have an unreasonably high interest rate, it is likely due to a poor credit score when you applied for the loan. Ask us how to refinance your student loan!

4. What are my payment options?

Your lender should be able to tell you the estimated payoff dates of your loans which can help you establish a payment plan that works for you.

  • Federal loan monthly payments will automatically calculate based on a standard 10-year repayment plan. If you cannot afford these payments, there are many income-driven repayment plans that can allow you to make smaller payments more in line with your budget. It’s important to understand any special conditions of these plans and how smaller payments may impact your loan balance.
  • Private loans are much less flexible when it comes to payment options. Review your loan agreement. Most private loans will spread out payment equally month by month for the duration of the loan. If you are struggling to pay back your private student loans, reach out to your lender to discuss payment alternatives. They would much rather you be making smaller payments than none at all.

Student loans will be part of your financial reality until you pay them off. It can be daunting to think about paying back this debt while you’re still establishing yourself professionally, finding a place to live, and making your mark on the world. Don’t panic! Answering the above questions can help you create a plan of action to pay off your debt and get back to planning for your bright financial future. If ever in doubt, reach out to Veitengruber Law. We can help you make sense of your loan repayment options.

Private Student Loans: What You Need to Know

private student loan

You did it! You worked hard, got a college acceptance letter, and graduated high school with a crisp, new diploma. Now is when the excitement and celebration of getting into college typically starts to give way to some anxiety. College is expensive and very few of us can afford to pay for a degree out of pocket. Most people know how federal student loans work, but what’s the skinny on private student loans? Here we look at the difference between the two and when you might need a private student loan.

Federal Student Loans

If you will be borrowing money to attend school in the fall, you’ll want to start with federal loans first. Federal loans are much more flexible in the repayment process, offering income-driven repayment plans as well as loan forgiveness programs. The terms and conditions of federal student loans are set by law with fixed interest rates. You will not be required to make any payments until after you graduate, leave school, or if change your enrollment status to less than half-time. However, sometimes federal loans will not cover the entire cost of attending college. This is where private student loans come in.

Private Student Loans

Banks or credit unions issue private student loans, typically with less repayment flexibility than federal student loans. The biggest reason to go for federal loans first is because private loans typically end up being more expensive than federal loans. Because the terms of the loan are at the discretion of your individual lender, different private loans can vary greatly from lender to lender. Depending on your specific circumstances, you could have a higher or lower interest rate, it could be fixed or variable, you may have to start paying for your loan while you’re still in school, or you may be able to hold off on payments until after graduation. The biggest drawback of private student loans is their variability, which can lead to confusion.

That being said, many students every year will take out private student loans to cover the costs of attending college. If you find yourself in need of a private student loan, don’t panic. There are plenty of good private loans out there, you just have to find them. This means putting in the time to do your research to find a loan with the best rates, fees, and terms for your situation. Don’t just settle for the first private loan you find. Compare interest rates, fees, and borrower protections across different lenders to identify the most affordable offer.

Which Private Loans have the Best Rates?

To compare all of the available private loans, check out your local banks and credit unions, but don’t be afraid to look online too. Some of the better deals on private student loans can be found through online lenders. One of the best ways to do this is through Credible, an online private student loan marketplace. Students (and parents co-signing for their children) can enter basic information to see multiple loan offers online. Credible allows you to compare terms, interest rates, and fees all on their website. Because many of these lenders operate via the internet, their overhead costs are lower, which could mean lower interest rates and fees for you.

How Much Should You Borrow?

As with any student loan, you will want to minimize the amount you borrow. This is especially true with private student loans, which tend to have limited repayment or forgiveness options if you have financial difficulty in the future. It is very common for students to take out loans for more than they really need. People overestimate their income after graduation and end up with loans they cannot afford to pay back. Unlike federal loans, there is no cap on private loans. A lender may let you borrow much, much more than you can realistically afford. In order to avoid being crushed under a pile of debt after graduation, only borrow what you absolutely have to and keep yourself on a budget throughout the duration of your college career.

Pay Back Private Loans First

If you do end up with a private loan, make sure this is your top priority when you start the repayment process. Many private loans begin accruing interest from the moment they are disbursed. If you can start making payments on these loans while you are in school, it is a good idea to do so. This can help you save substantially on interest in the long run.

If you are having difficulty paying back your private student loans, you’re not alone. Managing student loan debt is a heavy burden for many Americans. Veitengruber Law is a NJ legal team experienced in all types of debt management. We can provide customized debt solutions for your specific needs so that you can get the degree you need without fear of financial ruin.