Consolidated Credit Urges People to Use This Opportunity to Jump Start Their Personal Finances
President Obama revealed a new plan that would help millions of young people struggling to make payments towards their student loan debt. The plan will speed up legislation passed by Congress last year and reduce the maximum required monthly payment on student loans to 10 percent of discretionary annual income, versus 15 percent originally required by law. In addition, student loan debt will be forgiven after 20 years instead of 25, for those making consistent and on time payments.
Consolidated Credit is urging people with student loans to use this opportunity as a means to jump start their financial situation. Start saving that 5 percent in a separate savings account or pay-off credit card debt that may have sky-rocket interest rates. This new measure may enable millions of Americans to get a hold of their personal finances and help them to get out the financial mess that many of them are in.
Consolidated Credit experts advise people to consider the following strategies to make the most of the 5 percent savings:
- Invest – Start investing 5 percent of your monthly income in your 401K or a pension.
- Pay-off high interest credit card debt first – For an individual who has a $1,000 credit card balance with a 14 percent interest rate who pays the minimum amount due each month ($22.00), it would take over 64 months to pay off and the creditor will make over $600.00 in interest. That’s some pretty good motivation to persuade people to pay off their high interest credit card debt first. Student loan debt offers low interest rates, typically around 4 to 6.5 percent and people need to know how to prioritize their debts.
- Improve your credit score – Millions of Americans have low credit scores due to charged-off debts. Consolidated Credit advises consumers to use that extra 5 percent of annual discretionary income to help pay-off or settle any charged-off debts. This will significantly improve their credit score and allow them to pay less interest in the future when they need to purchase a home or car.
- Donate the 5 percent to a local homeless or animal shelter – Although millions of Americans are struggling to pay their student loan debt payments each month, even more individuals are struggling to keep a roof over their head or feed their families. By donating to a local non-profit shelter, you will be helping the local community and overall economy.