Yes my friends, it's that time of year again. No, not allergy season -- graduation. That seminal moment in our lives when, in ceremonies of varying degrees of pomp and circumstance, our elders pass on the wisdom of the ages to those of us who are evolving from the shelter of the ivory tower to the stark reality of the "real world."
Tens of thousands of graduates will likely hear that Emerson nugget "Hitch your wagon to a star." Others will doubtless hear the Dr. Seuss classic, "Be who you are and say what you feel, because those who mind don't matter and those who matter don't mind."
Commencement speakers throughout the land face the Herculean task of painting a picture of opportunity and challenge that is engaging, thought-provoking and reasonably optimistic while trying not to terrify or bore.
The good news: this is not a graduation speech. Not one Hallmark card verse (well, maybe one) in this piece. I leave that to the thousands of wizened elders who are feverishly working on their content and delivery of "life in the real world" barnburners at this very moment.
That said, if any prospective commencement speakers are reading, you might consider including some practical advice for the new grads that just might make their lives easier for the next few years.
1. Learn how to manage your student loans.
If you have federally-backed loans, consider consolidating them. Student loan interest rates are at or near all-time lows. Since the interest rate of the new loan is taken from the average of your existing loans, consolidation could save you meaningful dollars on interest.
But consolidation isn't right for everyone, as it may lengthen your repayment period and could temporarily lower your credit score by adding a "new" account to your credit report. And while private loans cannot be consolidated with federal student loans, consolidating just your private loans at a lower interest rate could be an option if your credit scores are substantially higher now than when the loans were originated.
Here's another trick: By signing up for automatic payments from your checking account, your loan servicer may lower the interest rate, often by a quarter of a percent, saving you thousands.
If you find yourself struggling financially, you do have other options with your federal student loans. The best is called income-based repayment (IBR). IBR allows you to limit your monthly payments to 15 percent of your monthly discretionary income, which is figured out by looking at the difference between your adjusted gross income (AGI) and 150 percent of the federal poverty line for your family size. This varies by state. Based upon this formula, you may even qualify to pay nothing. The program can continue indefinitely, and the reduced payments count toward your forgiveness period, which could be 10, 20 or 25 years.
You can also temporarily suspend payments through forbearance. This may help in a financial emergency. But unlike IBR, the payments you miss under forbearance do not count toward your forgiveness period, which means you'll eventually have to pay them.
2. Use your debt to increase your credit score.
In addition to the benefit of consolidation, student loans can help you strengthen your credit score, if you make timely payments every month.