You’ve just finished high school, your parents are beaming with pride as you’ve selected a prestigious university that churns out successful professionals. You can’t wait to begin your adult life and strike out on your own. Not to mention meet new friends and live the college life you’ve been fantasizing about over the past year.
Yet there’s a hidden presence that on one seems to have mentioned. It lurks about in the hallways of buildings and sneaks around the campus hanging over the heads of many of the student body. That unseen, yet detrimental, disease is student debt.
As you pack up and head to college, no one mentions this unpleasant side effect of college education. Even students who obtain scholarships and grants that cover their education costs, often end up saddled with heavy credit card debt. The reasons behind this deplorable side effect is a lack of personal finance education. Unfortunately, few courses in money management and budgeting exist. Yet there are a few tips to help manage your money and reduce your debt.
Increase your income
Though going to school full-time may leave little room for working, there are still a few ways to make money even with a hectic class schedule:
- Work summer and winter break. Jobs in the retail and restaurant industry are often open to seasonal employment.
- Pet or house sit. Something that is usually needed on the weekends or holidays, this is a great way to make a little extra cash.
- Take on a part-time job. The first place to look is at your university. If those jobs are being filled through a work-study grant, then begin looking around the university for positions that are flexible, such as restaurant or delivery positions. Tutoring is also a great way to make extra money and you can set your own hours.
- Apply for student grants and scholarships. Many departments offer semester grants and very few people actually apply for them. This means you have a better chance at being the recipient.
Budget your money
Whether you plan on living off your loans, grants, scholarships, parent’s income, or your own income, budgeting your money is your key to financial success.
- Determine your basic monthly needs. Usually this boils down to rent, utilities, food, and gas. Using a pencil and paper or a spreadsheet, figure out your monthly living expenses.
- Calculate how much money you will bring in each month. If you’re living off loans/grants/scholarships/parent income, you might need to divide the lump sum by the total number of months you are in school. This will give you a monthly total allowing you to divide up your basic necessities from any extra money you can put aside.
- Set aside some money for a rainy day and a little bit for fun. If you find you have a few 20’s left over after paying your necessary bills, put half away for a rainy day (you never know when you might need a new tire or a copay to the ER!) and the other half away for your spending money.
- Be sure to leave room in your budget for books and school supplies. Make sure you budget in the cost of books and school supplies. These items seem to sneak up on you, making it easy to justify swiping that credit card.
- Keep your student loans to a minimum. Take out only what you really need. If you devise a budget, that will help you figure out how much you really need.
- Don’t be a credit card using fool. A credit card is a great way to build good payment history which builds a strong credit score. However, you should only use credit cards when you know you can pay them back in a reasonable amount of time. Credit cards shouldn’t be looked upon as an emergency fund!
Managing your student loans
If you’re one of the lucky graduates who leaves college debt-free, consider yourself a stupendous anomaly. Many students have acquired some kind of debt by the time they graduate and they now need a definite plan to pay it off.
- Make payments towards your student loan interest while still in school. The monthly interest on student loans is usually minimal to begin with (unless you’ve taken out tens of thousands of dollars!) Paying off the interest while you’re still in school means that interest isn’t accruing making the total balance less.
- Use the deferment period to pay down more of the loan balance. Though your loans may be in deferment up to 6-months after you graduate, you can still make payments towards them reducing the total balance quicker.
- Revise your monthly budget and make Student Loan Payment a category. Pay more than just the minimum payment on your student loans.
- If you are having trouble paying your loans, don’t avoid them! Call your loan servicing company and set up a payment arrangement. They are usually more than willing to help you select the best program for successful repayment.
As a new college student, taking control of your finances means you’re on the path to wealth. Starting out with a little personal finance knowledge can mean the benefit of reaping the maximum reward; being debt-free!