Graduating high school and going off to college is a major rite of passage, and for many it marks a transition from childhood to adulthood. You're finally a responsible adult, responsible for all of your decisions, successes and failures.
It's an exciting time, and it can be easy to get carried away with all of your new found freedoms. It often doesn't take long to let things get a bit out of control, especially when it comes to your finances.
If you want to graduate college without a lot of debt, and with your finances under control it's important to make sure that you're making sound financial decisions from the start. So where to begin?
Today I thought it would be a good exercise to go through the student experience from start to finish, and talk about how you can keep your finances under control. So let's get started.
Table of Contents
Start Paying Attention To Your Finances
84% of college students admitted they need more education on financial management. It pays to educate yourself when it comes to your finances. No one cares about your money as much as you do, and if you just take the time to learn some of the basics of personal finance, you'll be in a much better spot.
Take a basic personal finance course while you're still in high school – if your school offers it. Take the time to read a book like Dave Ramsey's Total Money Makeover, or David Bach’s book, The Finish Rich Plan for Financial Freedom. Read up on the basics of making a budget, saving and investing.
Some things to consider doing when going to school:
- Get a basic no-fee checking and savings account.
- Figure out how to do a budget.
- Track your income and expenses when you first start school
- Figure out how much you'll need for the basics. Set aside a little for fun.
- Do your best to not overspend, and avoid falling into the credit card trap!
There are plenty of tools out there that can help you to come up with a budget, and then track your spending over time.
If you're currently a student, You Need A Budget is a great budgeting software to check out. You can even get You Need A Budget for free while you're a student! Typically it would cost around $60 or so. YNAB uses the methodology of doing a zero based budget – where all your income is allocated to a giving, saving or spending category, and no money goes un-allocated or “missing”.
Unfortunately when you're a student it's far too easy to have money leaks here, there and everywhere. A few hundred here and there to go out with friends, another thousand for the spring break trip, $1400 for a new computer, $500 for that new electronic gadget, and so on. All of the miscellaneous spending adds up quick, and unfortunately, a lot of the time it goes right onto a credit card or gets paid with a student loan!
84% of undegrads have at least 1 credit card. 21% of undergrads have a credit card balance between $3,000 and $7,000
Have A Plan For What You Want To Do, And How You'll Pay For Your Degree
Before you even begin your college career, it may be a good idea to consider whether or not you even want to attend college right away, or if you possibly want to attend a 2 year school, or look into getting an apprenticeship. I don't believe a 4 year degree is for everyone, and there's no shame in that. In fact, many blue collar careers can pay quite well.
If you do decide you want to go to school it's important to consider just what career field you want to go into, and then find a school that will fit your needs. Make sure you know what kind of an ROI you can expect to see from your career, and choose a school accordingly.
For example, if you're thinking about entering a career field that doesn't pay as well, you probably won't want to go to an extremely expensive private school with loans that will saddle you with debt for decades. By the same token if you're entering a field in the science, technology, engineering and math fields, you're likely going to get a better return on your money. Don't go to a school with a big name without first considering if it's your best option.
Before you go to school make sure you:
- Figure out your major
- Figure out what kind of an ROI you can expect to see from that major.
- Identify potential schools for that major.
- Identify which school will give you the best ROI, along with the best education for your money.
- Figure out how you're going to pay for your schooling!
College is expensive, so make sure you're getting a good ROI because in all likelihood you'll end up paying for at least a part of your own education. Costs are skyrocketing, more parents are saying that they expect their kids to pay at least a portion of their own education, and more students are graduating with thousands in debt. Here are some interesting facts:
- Costs to attend college have more than doubled in the past decade.
- A Discover Loans study found that 47% of parents said that their kids should pay part of their own way. Some said their child should be solely responsible for paying for school (15%), while other said their kids should foot most of the bill (32%) for their college education.
- Average debt of 2014 U.S. four-year grad $33,000.
- Average debt of 2014 Canada four year grad. $26,000
- According to the College Board, 4 years of tuition and fees at a private college will cost about $129,700. In 18 years it will be around $312,200.
- Tuition and fees at a public university (in-state resident) currently costs about $38,300. In 18 years it will be closer to $92,200 (source).
Student Financial Aid & Loans
When you go to school you should always make sure you know how you're going to pay for your education. Are your parents going to help? Are you fully responsible to foot the bill?
No matter who is paying, it's a good idea to find out what kind of financial aid is available to you as a student.
O’Donnell and Associates reported that the American Council on Education found full time college students receive financial aid (72%), grant funding (59%) and/or a loan (45%) to help offset the cost of college. Some experts estimate that students only pay about one-third of the actual costs associated with a college education out-of-pocket.
A majority of students are getting financial aid in one way or another, so don't get left out in the cold. Make sure you apply for as many grants and financial aid packages as you are eligible for. There are a lot of programs out there available to students of all means.
Places To Get Student Aid Or Information To Help You In Tracking It Down
Here are some resources of places you can go to either track down available financial aid, grants and loans, as well as sites to give you more information about the whole process.
- StudentAid by filling out the Free Application for Federal Student Aid (FAFSA®)
- College Scholarships
- The College Board
- College Financial Aid Advisors
- The Scholarship Coach
- Financial Aid News
- Go Financial Aid’s blog
- Simple Tuition
- The College Board
- U. Got It? blog
Remember, you can't get the free money for school if you never apply! So get applying!
Attending School For Free
There are some schools out there that will actually give you an education for free! Too good to be true? It's not!
You can actually get a free college education at a handful of schools. For example, Berea College in Berea, Ky., covers the full $20,900 tuition for all students, out of a combination of grants, scholarships and work-study. Cooper Union in New York City grants a full-tuition scholarship — valued at $150,000 over the course of four years — to all students. College of the Ozarks in Missouri requires students to participate in a work program rather than pay tuition.
There are plenty of alternative options out there if you search around. Want to attend school for free without actually being enrolled? Many schools now offer free classes online!
Working And Saving Money While In School
When you go away to school, what can you expect to spend as a student?
Average Student Spending
Here is a spending breakdown for the average student:
40% on discretionary items such as entertainment, apparel, services, travel, vacation
26% on room and board
19% on tuition and fees
8% on other expenses, including health care
4% on books and supplies
3% on transportation
As you can see the average student spends almost 40% of their income on discretionary spending! Things like entertainment, apparel, vacation and other things. That's a lot of money spent on things that aren't really necessary! What if you were to instead spend some of that money on your schooling, graduating with less debt instead of racking up the bills while you're in school?
Where To Find Work
So what can a student do to help with expenses while in school – or even to pay for part or all of their schooling? Get a part time job while you're in school! Studies have shown that students that have a vested interest and pay for part of their own schooling tend to do better.
- Find on campus jobs: Be a resident assistant, tutor, teaching assistant or work somewhere on campus like dining hall. There are often good work/study jobs that will allow you to work a few hours a week, while also studying.
- Get internships that will help your future career: Find a part time job or internship in your career field. It could help to open doors down the road as well!
- Get part time/flexible work off campus: Things like being a waiter, bartender or some retail jobs might work.
Keep Costs Low By Living Frugally
There are plenty of ways to live a frugal lifestyle as a student.
- Don't party as much as you could: You don't need to go out every weekend.
- Take advantage of things you already pay for: If you're paying for food service, eat at the dining hall – not at Taco Bell.
- Free university activities: Take advantage of plentiful free activities offered by the university and clubs/groups, often their paid for by your school fees anyway! For example, my old school now offers free tickets to football games for students!
- Use student discounts: A lot of places offer discounts for students, so do your best to find what those places are and take advantage! Microsoft, Apple, Adobe and others all offer discounts for students!
- Always shop around for the best deal: A colleague who works at a university just told the story of one student who was paying in excess of $200 for a cell phone plan. He told the student how he had a similar plan for over $140 less! Always shop around to find the best deal on the things you need. Chances are there is a cheaper (and sometimes better) alternative!
- Skip the car: Don't get a car, instead use the readily available campus transportation, a bike, or bum a ride from a friend! You'll save on gas, maintenance, insurance and other costs!
- Don't pay for things you don't need: Far too often we end up paying for too many expenses for things we don't even really need or want – things we signed up for and that seemed like a good idea at the time. For me in college it was a membership to a CD club where you got new CDs in the mail every month. Today it might be paying for cable TV even though you can get all your shows via Netflix.
Buy Your Texbooks Used
One big cost when you're going to school is buying textbooks for all your courses. Instead of buying your books new at the campus store, consider buying them used or renting them online, or look for postings in the residence hall from people selling their old books. You'll save a ton of money! Here are a few places to check:
Student Loan Repayment
Student loans are often a big deal for graduating seniors, especially when they graduate and aren't able to find work.
The Project on Student Debt, a non-profit, says that 15% of borrowers default within three years of entering repayment. At for-profit colleges the rate is 22%. (source)
When the average student is graduating with around 30k in student loan debt these days, it's important to know your options when it comes to repaying your student loans.
Refinancing Your Student Loans
One thing to consider when beginning your loan repayment is to look into whether or not it makes sense to refinance your student loans. Oftentimes graduates will have loans from multiple different sources, all with different rates. It may make sense to refinance some of those loans (the ones you can get a lower rate on) into a lower rate loan.
Check out a reputable service like SoFi to help you find a refinance plan that makes sense for you. According to SoFi, SoFi members who refinance their student loans save an average of $22,359.
Reputable Places To Refinance Your Student Loans Into A Lower Rate:
- SoFi Student Loan Refinancing
- CommonBond Student Loan Refinancing
- LendKey Student Loan Refinancing
- Credible.com Student Loan Refinancing
Loan Forgiveness Programs
Some students may be able to take advantage of loan forgiveness programs where part,or all, of your loans are forgiven. Two of the most popular ones are
- The Public Service Loan Forgiveness Program: (PSLF) allows eligible candidates working in the public service industry to limit repayment to 120 timely payments over the span of 10 years. After meeting the requirements, the remaining sum will be forgiven and is not considered taxable income.
- Teacher Loan Forgiveness: If you’re a teacher you’ll also be eligible for a special loan forgiveness program. Though the restrictions are strict, you can have up to $17,500.00 forgiven after teaching at qualifying schools for 5 full years.
Repayment Plans Based On Circumstances
When it comes to Federal Student Loans most people just sign up to be a part of the standard repayment plan. There are other payment plans available, however, depending on people's circumstances. If you're having a hard time making payments, you may want to look into it.
- Income-Based Repayment Plan (IBR) – Your monthly payments will be calculated according to your discretionary income.
- The Pay As You Earn Plan (PAYE) – Depending on your current financial standing your monthly payments will be adjusted accordingly to reflect current earnings and payments will change as your income changes.
- The Income Contingent Plan (ICR) – This plan is only available for federal direct loans, and it looks at yearly earnings, and family size to determine your monthly payments.
When it comes time to do your taxes, don't forget to take your tax break for interest paid on your student loans. With some limitations, as long as you fill out the form when filing your taxes (1098-E form last year), you'll be able to deduct that interest.
When repaying your loans, don't forget to look for programs that can help you to pay your debts, give you tax breaks for the interest you're paying or give you a more flexible payment plan.
Don't allow Your Education To Bankrupt You
Even though the return on investment for a college degree isn't likely what it used to be, it is still an important part of getting ahead. People who have a degree are still making more money on average, and earning more over an entire career. The key is to be careful with your finances before, during and after school to ensure that you don't saddle yourself with thousands in debt that you're not able to easily repay.
Before you go to school make sure you do your homework and find a career path and school that will give you a good return, without leaving you in the poorhouse. Also make sure to thoroughly investigate all options when it comes to grants and financial aid. As a last resort look into getting loans to help pay for school.
While you're going to school make sure to live on a budget, and not let your spending get out of control. Don't take on more loans than you need, and if you can, pay for your education with cash where possible. Also realize that excessive or aimless education and advanced degrees can often lead to high consumption behavior according to Thomas J. Stanley of the Millionaire Next door. Make sure you have a goal and end game in mind when it comes to your education.
Finally, after you graduate do you best to setup a payment plan for your loans that will help you to get them paid off as soon as possible. Make sure that you take advantage of tax credits and loan forgiveness programs that might be available to you.
Remember, no one cares about your money as much as you do. Do your best to pay attention from the start, and stay on top of your finances, and you'll be in a much better place on graduation day.
Have your own tips for students on how to keep their finances in check? Tell us how you saved while you were in school in the comments.