Fall semester is well underway, and many college students are worried — but not about finding jobs. College students are graduating with more debt than ever. About 60 percent take out loans each year, and it is estimated that, in 2013, the average graduate owed between $24,301 and $63,000 in government, private and state loans. Fortunately, while there is little students can do about the rising cost of education, students can still thrive financially in the face of an uncertain future. Here's how.
1. Do the math
Budgeting isn't just for tight-fisted parents and poor families. Everyone can benefit from a 15 minute planning session, and students are no exception. The first step involves simple math: income minus expenses.
First, list all post-tax income, and then add up everything that subtracts from that balance. This includes tuition, textbook costs, rent, transportation, food, clothing and spending money. Keep estimates safely high, and don't forget to factor in a few unexpected costs for flat tires or illnesses.
"It's surprisingly easy for your finances to develop a few leaks," the TopTenReviews.comstudent guide advises. "These insidious little extras can slowly but steadily drain away your balance, going unnoticed until major damage is done. If you've never combed through your bank and credit card accounts to analyze how you spend your money, this is an essential first step for improving and safeguarding your finances."
Keeping an eye on the numbers for at least two months will give a better idea of what future semesters will bring.
2. Look for ways to save
While the college experience should be an enjoyable one, it is possible to live on less than many students expect. For instance, when planning meals, ask a roommate to take turns cooking and split the cost of groceries. Less food and money will go to waste, and you'll have more time to spend studying instead of cooking.
Frugality is a college student's friend. Learn to distinguish between wants and needs. Even needs can be fulfilled inexpensively with a little planning. Is an apartment with a washer and dryer really necessary, or can you plan a weekly trip to the Laundromat and save $80 per month? Is it truly necessary to purchase lunch on campus, or can you pack a lunch or snacks and save $120 per month? Used textbooks are often much cheaper than new ones, and selling back books will help recoup costs.
As the semester goes on, it will be easier to recognize other sources of savings. Many restaurants, stores, sports arenas and other services offer student discounts. Keep your student ID card near your debit card, and remember to ask about discounts before making purchases.
3. Learn to use credit the right way
College students are commonly targeted by credit card companies advertising offers for "special student" cards. As a result, many students give in to the tempting credit applications piling up in their mailboxes. This isn't necessarily a bad thing. Building a healthy credit rating is an important part of life. Using credit correctly can create a strong foundation for the future.
First, check the annual percentage rate (APR). While many cards draw in customers with 0 percent interest rates for the first few months, the long-term rate is higher than other cards. Unfortunately, it is difficult to find cards with less than 15 percent APR, and some rates are much higher than that. Read through the fine print on the back of each credit card offer, and watch for one that stands out as a better option.
Second, focus on establishing a good credit history. There are two ways to do this. Paula Pant of The Huffington Post advises cutting up credit cards as soon as they arrive, but keeping the accounts open. "Make a small, recurring monthly purchase, like your Netflix subscription, with the account number," she says. "Set up auto-pay so that you'll never be late on a payment. Voila — you're now building a credit history without putting yourself at undue risk." A second method is to keep the card but use it only for small monthly expenses such as gasoline or groceries, and then pay the balance off each month. It is the expenses that carry over from month to month that can hurt credit scores.
Once you have a card, resist the urge to get several cards. Each time you apply for a new card, an inquiry is made on your credit report which can hurt your credit in the long run.
4. Minimize debt
Many students are turning to student loans to pay increasing tuition costs. Unfortunately, many fail to take advantage of additional opportunities available to them. Scholarships, which can be income-based or achievement-based, can be helpful. Check with your school's financial office for additional options.
Employment is becoming increasingly necessary in minimizing student debt. A 2012 census report determined that 71 percent of undergraduates work during their college years. Of that number, one-fifth work at least 35 hours per week. Whether the work involves cleaning campus restrooms at 5 a.m. or working an off-campus job, employment can mean the difference between a few thousand dollars of debt and tens of thousands.
5. Do a little life planning
Living frugally will do little good if entire semesters and thousands of dollars are wasted searching for the perfect major. If unsure of where to specialize, focus on general education courses or take time to explore your options. Take a career aptitude test, gain experience in an internship, interview people established in your desired career and do some research. Then, once you've found the right major, focus on the credits that count toward graduation.
Enjoy the college experience, but remember to get every penny out of those tuition dollars. Even if you don't end up debt free, at least you'll find yourself guilt free on graduation day.