One thing that’s great for college students is the different experiences they have in their college years. Something that’s not so great for them is the cost that comes with those experiences.
The National Center for Education Statistics says the average college student will graduate with almost $10,000 in debt due not only to student loans, but also to one or more credit cards. With college students spending more and more and going deeper and deeper into debt, how can they find any money to save?
Borrow only what you need
One of the most common ways students fall into the debt trap is by taking out excessive student loans. Dawn Brummett, a college graduate, recalls taking out several student loans to help pay for living expenses during her college years.
While it was great to have the money then, the resulting debt is now a huge burden. Two words she used to describe that debt are “horrible and overwhelming.”
“There is no guarantee that you will find a well-paying job when you graduate, which will make paying back your loans even more difficult,” Brummett says.
Bonnie McCarty, assistant director of the financial aid office at Middle Tennessee State University, recommends avoiding credit if at all possible. She understands that college is a huge expense, sometimes requiring the help of loans, but some students abuse the privilege by using their loan money to buy pizzas, stereos, cars, and other things that they wouldn’t ordinarily be able to afford.
“Don’t make unnecessary purchases on credit,” McCarty adds. “You may be paying for that pizza for years after you graduate.”
She also suggests that if you have to borrow money to pay for college, you should borrow for educational purposes only. “Many students don’t know that they don’t have to borrow the full loan amount.” She says you should borrow just enough to cover tuition, books, and other fees related to school. Period.
Check out private scholarships
Another way to help keep loans to a minimum is to apply for private scholarships within the college. McCarty says that there are many scholarships available that most students don’t know about and others don’t even care about. Some students have even told her they don’t want to take the time to write an essay or to apply for the scholarship.
“If you spend 10 hours working on a scholarship that is worth $500, you are basically being paid $50 an hour to write an essay,” McCarty points out, “and it usually doesn’t even take that long to apply.”
Brummett said she agrees with McCarty, and adds that you should seek in-depth financial counseling while in school to help you manage your money while in college, and to put you on the right track to managing your money after you graduate.
Timothy Wyman, a certified financial planner at the Center for Financial Planning, Inc., also understands that loans are sometimes necessary to help fund college expenses. But he, along with McCarty and Brummett, agrees that having an active savings plan is equally as important as finding a way to pay for college.
Create a budget
So how do you get started on a budget? Brummett suggests that each time you receive a paycheck, to “pay yourself first” by putting a certain amount of money aside in a savings account that will yield interest on your balance.
Wyman notes that when saving, it is important to focus on low risk vehicles such as savings accounts, CD’s, and money market accounts that are not linked to a checking account.
Many banks also offer special services for students, which is important for you to remember. They will be able to provide you with effective savings plans and offer other financial planning programs.
Some other ways of setting aside money, McCarty suggests, is to put cash in envelopes specifically marked for certain purposes such as savings, travel, gas, food, entertainment and so on.
Based on these suggestions, starting and maintaining a successful savings plan is not difficult. Just be sure to make use of the financial services both schools and banks have to offer, and budget money around a savings plan.
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