By Marissa Barnes
As college students, most of us are familiar with the concept of borrowing loans in order to pay for our college expenses.
As college students, most of us are familiar with the concept of borrowing loans in order to pay for our college expenses.
What some of us aren’t familiar with, however, is the concept of money management. Some students have to work their way through college and understand what it’s like to make monthly payments on things such as a car or an apartment.
On the other hand, many students have the support of their parents throughout college and often lose sight of how expensive it is to be a college student.
The biggest burden to students and their parents is covering the costs of tuition. This is usually done by accumulating student loans and other debts that can take years to pay back.
In 2009, the average college graduate carried about $24,000 in student loan debt, according to The Project on Student Debt. An even bigger factor in having this much debt is the fact that the unemployment rate for college grads reached 8.7% in 2009 which is the highest rate on record for grads between the ages of 20-24.
What’s worse, many students often carry the burden of paying for other expenses including car/insurance payments, cell phone bills and credit card debt.
All too often, students go through college not knowing exactly how much debt they’ve accumulated, and thus are very lax with their spending habits.
It may not seem like a big deal to charge Thursday night’s pizza and beer to your credit card, but what about in the long run when you’ve accumulated a credit card bill with an interest rate that will take you years to pay off?
Unfortunately for most borrowers of any kind of loan, lenders are usually willing to give you a lot more money than you can comfortably afford to pay, and many college students borrow loans without knowing what they’ve gotten into.
On the other hand, there are plenty of sources that students and their parents can use when it comes to financing their child’s education.
Where to start?
The easiest and most common place to apply for federal loans is to submit your Free Application for Student Federal Aid (FAFSA), but before you do that, you’ll need to do some homework.
It’s also crucial to start looking for loans early.
By starting early, you’ll be a few steps ahead of the curve. If you’ve applied early enough, you may be able to take advantage of grants, work-study and other loans that you’re not required to pay back.
Start too late, however, and you could lose out on the free money.
It’s also very important to take advantage of scholarships. It is often thought by many students that they must be a star athlete, an A student or a musical prodigy in order to receive such scholarships, but there are many sources that give out scholarships based on need or affiliation with certain organizations.
And they’re not hard to find, either. Websites such as Fastweb.com and Finaid.org have searches that can find scholarships for you based on your background.
Once you’ve accomplished those two things, you’ll want to get in touch with your college advisor. He or she will be the most important person you’ll ever communicate with in your college career aside from the Financial Aid office.
Your advisor will be with you during all four years (or possibly five) of your college career and they will be the ones to tell you which classes to take and what career choices will be best for your major.
You’ll also want to keep in touch with your loan provider on a regular basis in order to keep track of how much you’re borrowing.
A big pitfall of borrowing loans is that usually, loan providers only send out statements every six months which can prevent students from seeing how much debt they’ve actually accumulated.
Keeping your debt to a minimum will help you to keep your monthly payments as low as possible, and the extra money that you won’t be paying for your student loans every month could be saved for future investments like a house or retirement.
Other Options
Some students are considering options such as community college and public universities over private colleges to save money.
The average college tuition for Iowa community colleges in 2009 was about $3,300. Compare that to averages of $7,200 for Iowa public universities and $20,000 for Iowa private colleges.
Keep in mind, however, that these costs do not include room and board, books or other living expenses that are incurred throughout the year.
Due to the recent recession, community college enrollment in 2008 rose to 11.8% for all 18-24-year olds which is up from 10.9% in 2007, according to a study conducted by the Pew Research Center.
Although community colleges are small, and may not offer the wide variety of options that a four-year school does, they are great for students who may not know exactly what they want to do yet.
Community colleges offer the same education that four-year schools do, and most of the time, credits are transferable to other in-state schools.
Another benefit of two-year schools is that most of the time, they’re close enough to home that most students have the option of living with mom and dad while they get on their feet.
Another option to consider before borrowing loans is the kind of career you’ll want to have after you’ve graduated.
By doing some research, you can find the starting salary for someone in your career field and will therefore be able to determine the total amount of loans you’ll be able to borrow without digging yourself into a hole.
The National Association of Colleges and Employers provides a Hiring Index which tracks anticipated hiring activity in the job market for new college graduates. It also provides a salary calculator which can help students to see what their anticipated salary might be once they’ve landed the job.
Avoiding the Trap
If you’ve already started accumulating loans- which most of us already have- it’s important to talk to your college’s financial aid office to find the best ways to manage your debt properly.
The UNI Financial Aid Web site offers plenty of resources to help guide students and their parents through the loan-borrowing experience.
The “Live like a Student” campaign highlights ways for students to properly manage their money and learn to live within their means while attending school.
They also offer specific guidelines for loan borrowing based on what type of student you are (i.e. traditional, transfer, graduate, etc.).
Once you get to college, there are certain things that you may think you need, but in all reality, could live without. Kiplinger’s article: 12 Things College Students Don't Need lists things that students can usually eliminate from their list of needs without much hassle.
A few of these include new text books, a car, a large meal plan and a credit card.
By eliminating these things, students can potentially save $2,000-3,000 and still be able to live comfortably.
Living like a college student doesn’t have to mean living poorly if you know how to manage your money correctly.
You can still enjoy the luxuries of being able to go out with your friends on occasion or order some take-out during finals week, but at the same time, you should know your limits.
Some important things to keep in mind when considering your borrowing limits are twofold. The first: don’t borrow all of the money that you’re offered unless it’s an absolute must; and the second: don’t sign up for a credit card until you’re financially able to do so.
These two tips will help you keep your debt to a minimum and thus, your financial situation will be better off in the long run.
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