This is a guest post from Katherine Pilnick, who writes and blogs about personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.
What’s the biggest threat to living debt-free?
The biggest threat to a debt-free lifestyle is probably the rapidly rising cost of higher education. Tuition costs rise twice as quickly as standard inflation rates. This means individuals are practically forced to incur debt even before they have careers. After they get settled into jobs, student loan debts will either take a greater portion of their monthly salaries or the loans will require several extra years to pay off than required in the past.
What age group is most at risk for getting into debt?
Every generation is at risk of incurring debt. Older Americans might face growing medical costs if their health deteriorates, and they have to meet these costs on a limited income. Those in their 30s and 40s predominantly have mortgages to pay and families to support.
But going back to the last question, the younger generation is arguably the most at risk of going into debt. Young people typically don’t have financial experience or training. So, on top of student loan debt, they might be tempted to ring up credit card debt or take out auto loans.
In July, a COUNTRY Financial survey showed Americans’ debt threshold for student loan debt is rising. With students potentially taking on more debt than ever before, are we raising a debt-ridden generation?
This question isn’t as straightforward as it seems. Although Americans now hold a total of over $1 trillion in student loan debts, evidence shows young Americans still make an effort to live within their means, at least to an extent. People are now waiting longer to buy their first homes. Between 2009 and 2011, nine percent of 29- to 34-year-olds took out their first mortgages. This is about half the percentage of 10 years ago.
How can students decide what’s an acceptable amount of loan debt?
A good rule of thumb is: don’t take out more in loans than you expect to earn during your first year in the workforce. This comes with a lot of uncertainties. Many students enter college uncertain of what they want to do. Even for students who know their desired occupations, this rule leaves room for guesswork in an ever-fluctuating economy. It’s best for students to err on the side of caution if they don’t know how much debt they’ll be able to afford.
Where can people go to learn about getting out of debt?
Government sites are always good for reliable information, and their consumer-targeted information is in plain English. The Federal Trade Commission and MyMoney.gov are good starting places.
Debt.org is also a great resource for anyone with debt, regardless of their stage in life. We have information on student loans, credit card debt, mortgages and retirement planning. We have tips on becoming debt-free and staying out of debt, and we’ll talk to you one-on-one to give personalized advice.
