Home > 2012 > Students

Five Things to Do and Not Do For Your New College Grad

Advertiser Disclosure Comments 0 Comments

Let’s face it, the need for financial aid doesn’t magically disappear once a college diploma is earned. New college graduates heading out into the real world will likely come a knockin’ on family doors for some help in the early going. Here’s how to help a new college graduate without totally messing up your own finances:

Do …

… make sure they have health insurance. Even for graduates who’ve managed the not-so-easy feat of landing a full-time job in this rough job market, it may not come with full benefits.

No one, no matter how young and healthy can afford to forego health insurance. Parents can currently keep a child on their health plan up until the child turns 26. Just be aware that federal rule is part of the health reform case before the Supreme Court. Depending on the Court’s ruling—expected in June—this provision may be changed. Stay tuned.


Credit.com’s Credit Report Card
Check your credit bureau profile for free with this great tool. See your detailed credit evaluation, expert advice on managing your credit, and unlimited free updates every 30 days.
Get Started Here »

Another option is to buy an individual health insurance plan. For young healthy folks the cost should be quite manageable. At a minimum aim for catastrophic coverage: insurance that has a higher deductible, but provides coverage in the event of a major illness or injury. This is one must-have that family should gladly chip in and help with, if necessary.

[Credit Check Tool: Try Credit.com’s Free Credit Report Card]

… jump start their retirement savings As great as it would be for every twenty-something to get cranking on retirement savings, we all know that’s a long shot given the long list of other priorities (see: student loan repayment, rent, covering the credit card bill etc…) This is where family can make a huge impact: help your college grad start socking away money in a Roth IRA.

As long as your grad has earned income, the money for funding a Roth can come from another source: i.e., the bank of Mom, Dad, Aunt, Uncle, Grandma, Grandpa etc. Any individual with income below $110,000 can contribute up to $5,000 this year in a Roth IRA. You could front your grad the full $5,000. Or consider a family match for every dollar they contribute. Could be dollar-for-dollar. Or given there are just starting out, maybe a $4 for $1 match. So if your grad contributes $1,000 you’ll kick in the other $4,000. Do that for five years and then let the sum just keep compounding at an annualized 6 percent, and today’s 22-year-old college grad could have more than $300,000 by age 67. That’s a pretty nice nest egg, jump-started by family.

… make sure they are on top of their student loans. Within six months of graduation, students must begin paying back their college loans. Doesn’t matter if they are employed or not. The penalty for not getting with the repayment program is fierce. Defaulting on a student loan is not a solution: wages will be garnished, credit scores will be eviscerated, and there is literally no escape as student debt is not discharged in bankruptcy. Cheery news, eh? That’s why helping to make sure your grad is on top of their repayment is so important.

If your grad has federal student loans there are some terrific options for deferring payments if they are unemployed, or getting on a low-payment plan tied to their income. But they must apply for both. Their financial aid office should have walked them through all this prior to graduation, but that may not have happened—or registered in the waning days of college. The Department of Education has a clear walk-through of the repayment options for federal student loans.

If your grad has private student loans, it is doubly important to make sure they don’t drop the ball. Private lenders have the right to pile on all sorts of fees and penalties that can cause a manageable balance to balloon out of control. Unfortunately, private lenders aren’t required to offer the same generous repayment terms as are available on federal loans. But playing ostrich is just going to make matters worse: while the grad has her head stuck in the sand, the loan will fall into default, and from there it’s a short hop over to a debt collector. And you really don’t want that fate to fall on your grad, right? So the best move is push the grad to stay on schedule with the payments.

[Related Articles: Read more on student loan debt]

Don’t …

… co-sign for a car loan. Sure, your freshly minted college grad might need a car to get to the new job. But don’t reflexively think it’s your job to co-sign for a car loan. If your grad flakes on the payments that means you are on the hook. And don’t think they will learn a hard lesson if the car is repo’d. You’ll take the hit as well: it’s going to show up as a major ding on your credit file.

Encourage your grad to shop for a less expensive car-new or used-that they can qualify for financing on their own.

… co-sign for an unsecured credit card. Sure, this one is unsecured debt, but it’s still got the potential to screw up your finances. The credit card issuer—or the debt collection firm that buys the account—can and will come after you for payment.

If your grad can’t land a card on her own, then encourage her to shop for a secured credit card that reports transactions to one of the three major credit bureaus. With a secured card the holder will need to fork over a deposit—that’s the secured part-and charges are limited to that sum. It’s credit on training wheels. The idea is for the grad to spend six months to a year being a payment angel on this card to start building a solid credit report. Then it will be no problem to graduate into a regular credit card; in fact, chances are offers will start pouring in once that payment history on the secured card is established.

Now about the deposit: if your grad can’t navigate this speed bump, go ahead and chip in. Up to you whether you want to make it a gift or a loan.

[Credit Cards: Research and compare secured credit cards at Credit.com]

Image: Bill S, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team