Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

03/23/2004
Balancing car debt and student loan debt.
I am a 25 year old single woman, recently out of graduate school and in my first real job. Primarily my main concern at this stage of life is the amount of debt I owe for student loans. While I've already figured what a monthly payment will be like, I am quite overwhelmed at the thought of having to pay off this debt for the next 30 years. I would also like to buy a new car within the next year (I've been saving a bit for this), but I'm wondering if that's a wise decision given the amount of debt I have. Can I really afford something like this and is this something that is in my finanical best interest at this time?
Bettye J. Banks:
expert info »
Please know that you are not alone. Many graduates face the same problem, but remember those loans are what allowed you to achieve the educationl experience that will advance your career. I strongly recommend that you take advantage of a legitimate and traditional credit counseling service for low-cost budget counseling. It will help you to determine what options you have. You can always accelerate the repayment of student loans as your income increases. It seems daunting right now, but will become easier over time. If you have more than one student loan, you may also wish to consider consolidating those loans into one loan at a more attractive interest rate. Check on-line at http://loanconsolidation.ed.gov/. Essentially, new debt right now might not be in your best interest, unless your current vehicle is unreliable. Remember also that the point of a vehicle is getting from point "A" to point "B". If you decide that you must have a new car, do not get one that will cause you to exceed 20% of your NET income in consumer debt.
Carrie Bailey Morey:
expert info »
While I am sure the thought of the school debt is overwhelming, you have to remember that it was an investment in yourself, so it will pay off. You need to set up a budget and pay as much of the debt off as possible.
With that being said, if you need a car, you need a car. I wouldn't look at purchasing a new car, because a car is not a particularly good investment--they only decrease in value. Try looking around for a used vehichle, maybe one that was once a rental car? Obviously, safety is your nuber one priority, but before you start shopping put your monthly budget together and see what you can afford. Don't overextend yourself with more debt that you already have!
 

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