ó Twenty-seven-year-old Leigh Hammel has a graduate
degree and a full-time job in one of the nationís most
vibrant metro areas. So whatís not to like?
graduated with student loans that now have a combined
outstanding balance of more than $80,000. She expects to
earn about $70,000 this year, but now her student-loan
payment is scheduled to triple from $400 to about $1,200
a month because of Hammelís bigger salary and her
separate decision to increase her debt payments.
makes me a little nervous," Hammel said. "I
know itís doable, but it will definitely make things
is starting her career as a member of a large group of
young adults with negative net worth because of student
loans. For this generation of college graduates, debt
management is an essential rite of passage to adulthood.
under 45 are more likely than members of previous
generations to finance their college educations with
debt, according to a national survey by the Federal
percent of those under 30 with bachelorís degrees
borrowed money to pay for them, the 2014 survey found.
And 54 percent of people in the same age group with
graduate degrees financed their advanced studies with
separate study by the Federal Reserve Bank of St. Louis
found that the median net worth of households with
student loans is 36 percent that of households free of
college debt. That study was based on 2009 data; since
then, college degrees have become more expensive.
borrowed about $10,000 to complete her bachelorís
degree in geology from Stanford University. Her debt
really ballooned in graduate school.
December 2013, she earned a masterís degree in
international environmental policy from the Middlebury
Institute of International Studies at Monterey, Calif.
graduated with eight student loans totaling $92,564,
with an average interest rate of 6.57 percent. She has
since whittled the outstanding balance down to $82,290.
for her, Hammel landed a good job in Seattle as a
program manager for MedBridge Inc., a provider of online
education programs for health care professionals. She
earned about $58,000 in 2015. This year her income could
reach about $70,000.
her above-average income, Hammelís net worth is
solidly in the red because of her student loans. She
also owes $280 a month on a car loan.
assets donít come close to offsetting her debts. She
has about $5,000 in two individual retirement accounts,
and she just signed up for her employerís 401(k)
negative net worth is not unusual for young adults who
are recent college graduates. Itís also not
necessarily worrisome. After all, they have a lifetime
to build wealth and get their debt under control.
starting out with a lot of debt can affect their
decisions, such as making major purchases or getting
married, studies show.
makes ends meet by living with her boyfriend in his
Seattle house and sharing household expenses.
helps a lot," she said. Were it not for their
shared living expenses, "I wouldnít know what I
asked for advice, and the Puget Sound Chapter of the
Financial Planning Association put out the call for a
volunteer financial planner. Mark Bergeron, president of
WLFB Inc. in Kirkland, raised his hand. He looked over
donít have hardly any money to save because theyíre
paying off debt," Bergeron said of Hammel and her
boyfriend. "You canít spend it and save it at the
first order of business was reducing Hammelís student
doing some searching, Hammel found online student lender
CommonBond. One of the New York companyís refinancing
products let Hammel consolidate her eight student loans
into a single loan with an interest rate of 5.1 percent,
saving her money on interest.
also increased her monthly student-loan payments. If
Hammel sticks to her plan, she expects to pay off her
student debt in five years.
also began tracking her spending on the personal-finance
website Mint.com. The exercise made her more aware of
where her money was going. One revelation was how much
she was spending in coffee shops and restaurants. As a
result, she is eating out less often.
Hammel had no emergency reserve, Bergeron urged her to
establish a line of credit with a bank so that she would
have a backstop for unexpected bills. Having a credit
line, and using it, would also help Hammel establish her
even though Hammel is young and healthy, Bergeron
advised her to get life insurance and prepare a will,
just in case.
Hammel is focused on paying off her student debt,
tracking her spending and saving with her employerís
retirement plan. If she doesnít stray from her plan,
Hammelís net worth should flip in a few years from red
adults starting their careers are often light on assets
and heavy on debt, especially student debt. But that
doesnít mean they canít save.
you live under your means, you always have means,"
said Mark Bergeron, a registered investment adviser and
president of WLFB Inc. in Kirkland.
people employed by companies with 401(k) programs should
sign up for the retirement-savings plans, he said.
should also put money into a separate savings account
that doubles as an emergency reserve for unexpected
both cases, young workers develop the savings habit and
build wealth over time with years of compounding
yourself first," Bergeron said.