College is a time of newfound freedom for many students. But that can spell trouble if that freedom meant being easygoing with their personal finances too. Students need to understand basic money management skills such as living within a budget and handling credit and debt. A solid financial foundation can lead to a lifetime of financial success.
Why Financial Literacy Matters in College
Financial literacy seems to be a difficult concept to grasp, but it is an important life skill that you can count on. There are a lot of baffling terms used in finance which discourages people to understand it fully.
While financial literacy should have been taught to us by our parents, it’s the school’s responsibility to reinforce these learnings so kids can make better financial decisions as adults. However, the Council for Economic Education found out that there are only 17 out of 50 states that require classes on personal finance for their students.
Why should it matter if we know what interest rates are, applying for loans, or why is it important to save for retirement? Financial literacy prepares us for crucial life decisions from understanding our student loans, how to save money for our future without being fooled with hidden fees, and most of all, how to be debt-free.
Financial literacy might be your problem right now, but your problem is the nation’s problem, too. Now that Americans are now $1.28 trillion deep in student loan debt, it can affect the country’s economy.
Once you graduate and have a job, you’ll be busy paying off your student loans instead of making big financial decisions like purchasing a house or a car. Because of that, certain business activities aren’t happening. You postpone making big purchases, you hold off on putting up a small business that would have opened job opportunities. Fewer people are spending money to run the economy, while more people are paying off their debts.
Financial literacy goes beyond knowing mind-boggling terms or monitoring your expenses. It can help you make sound, realistic financial decisions that can affect your situation in the long run.
Preparing for College
Having access to college is important, but completing it is crucial.
Earning a college degree is one of the sound investments an adult must make in his life. Despite the rise of fees to invest for a college degree, making it through college life is yet another struggle. This is the stage in any student’s life that he learns to be more independent to make decisions of his own, to progress towards achieving their dreams.
How do you prepare yourself for college? Here’s CreditLoan’s infographic checklist that can help you through your college life.
In college, you’re the one in charge of your finances. You might have your tuition taken care of, but you still need money for emergency situations. Setting aside a small amount of money is good practice, but it is practical to have your own banking account during your college years can help you conveniently pay anywhere.
Here’s a quick list of frequently asked questions about student banking:
When should I get a bank account?
- As soon as possible. Leaving for college on the next semester? Pack your things and visit your trusted bank to open an account. The sooner you establish responsibility, the sooner you develop the habit and discipline of managing your finances. Still don’t have a bank account? You may be surprised that your university’s recommended debit card might be costing you more than having your own bank account. Look for other options, weigh the pros and cons, and choose what’s more convenient and thrifty for you in the long run.
How do I choose a bank account?
- Research and review. Choose a bank that has a proven track record. Check if the bank allows you to access your information online without extra fees. It will be convenient if the bank has their own secured mobile app, so you can check your transactions on the go, or even find an ATM near you. If it’s possible, have your account linked to your parents’ account for easy money transfers. If you don’t like the idea of going online, check your school’s community ATM presence. Look for a bank that has a good ATM presence in the campus and offers good deals and the like.
- Choose a checking account. While some may advise that a savings account is better in the long run, having a checking account usually means less to no fees when you use it, plus some checking accounts do not require a maintaining balance.
Settling unexpected fees
- Avoid fees by having your own account. Have your financial aid deposited to your bank account to avoid other fees. If you have researched properly, you shouldn’t worry about other banking fees or out-of-network fees.
- Access your account via mobile or online. Instead of opting for paper statements delivered to your doorstep, opt for an electronic statement instead. Usually this is sent to you via email; paper statements costs around $2 to $3 a month; money that you could have saved to buy other things needed for your education.
- Overdraft fees. Before making a transaction, make sure that you have a sufficient amount of money in your account. Be mindful of your transactions that can cause overdraft fees. If your bank offers overdraft services, ask how you can avail it for your account.
Things you need to know about financial aid disbursement
- There are many factors that are considered when it comes to financial aid. CreditLoan has a guide on student loans and how to get financial aid, grants, scholarships, work study programs and more.
- Check with your college or university on who transmits your financial aid. They will also inform you on disbursement schedules, frequency on disbursements, and more.
- Aside from maintaining a satisfactory grade (according to your college or university’s standards), check with your school if they have other requirements to retain your eligibility for a financial aid.
As student loans and tuition fees rise every year, it has become increasingly difficult to graduate college without owing money.
Approximately 7 out of 10 college graduates leave their schools with an average of $33,000 deep in debt. Despite this staggering figure, a degree is still worth investing in, and students shouldn’t be afraid of loaning for their college funds.
Introduction to Student Loans
A student loan is simply a type of loan that students can acquire to help in paying for their tuition and other fees and expenses.
Repaying Student Debt
Majority of the student loans in the country are handled by the US Department of Education, so the process to repay student debt is simple. Other opt to avail loans from private lenders, and those are managed by various loan servicers.
There comes a time that a student can no longer pay for his student loans; there are other ways on how to settle your debt! Generally, you have three choices on how to settle your student debt:
- Repayment Plan. This can help you in rearranging the terms of your loan and there are different plans depending on the amount you owe, so choose wisely.
- Deferment. With Federal Direct Loans and Perkins Loans, you can “defer” or postpone paying your loans when you are “experiencing financial hardships.”
- Forgiveness. Also known as a loan discharge, loan forgiveness will free you from your debts, given that you have gained certain qualifications such as volunteering for selected organizations, serving in the military, and more.
Before you apply for a student loan, or before you settle with a new repayment plan, take time to read CreditLoan’s comprehensive guide on student loans that tackle these topics in-depth. Remember that how you tackle your student loans will reflect on your long-term plans and decisions, so choose wisely on how to repay your student debt.
Dealing with Debt
Debt is a tough cookie to beat. It has become a “necessary burden” to carry as student loans take care of the primary expenses for post-secondary education. We believe that college students need proper guidance in making informed decisions to safeguard their future from being buried deep in debt.
Here are some steps that college students can follow to deal with their student debt.
- Make the most out of your grace period.
- Gather details on your loans and understand its payment options.
- Choose your repayment plan wisely.
- Live a frugal lifestyle.
- Consider budgeting your money.
- Work more to earn more.
- Don’t forget your student loan interest during tax season.
- Apply for jobs that can help pay your debts or help in student loan forgiveness.
- Look for volunteering opportunities!
- Move to other places for reimbursement or to ease expenses.
- Avoid fees for late payment, allow auto-debit from your account.
- Continue to pay even during deferment.
- An alternate way to pay loans: uPromise.
- Avoid adding big debts on top of your existing loans.
No Non-Sense Frugal Tips
We mentioned previously that it is recommended to live a frugal life.
Living frugally means you make smart, sound, and reasonable financial decisions and money management. Since you’re going to be on a tight budget until you finish off your loans, frugal living is the best way to go.
Nevertheless, once you develop the habit of living frugally, you will find yourself saving more money. Once you have taken care of your debts, remember that that is not an excuse to loosen your grip on money management.
College students, try these frugal tips and make frugal decisions!
Housing - There are different housing options that you can avail when you go to college. You can choose to live on or off campus, or if it’s possible, you can still live at home.
The norm isn’t always the practical route. If you can share rooms with friends to lower the rates of renting a property, do so. Canvas and look for different price offerings before making a decision.
Food – Prepare your own packed lunch. If it’s allowed to cook in your residence, we advise you to prepare your own food. You can control your diet, and may help you lose some extra pounds on the scale, too. On the other hand, limit merrymaking by learning to decline on every dine-out invitation. Instead of spending money for carbonated drinks, stick to drinking water.
Transportation – Having your own vehicle in college can drain your purchasing power. There are a lot of things to consider when owning a car: gas, maintenance, and insurance. Use the public transportation, walk, or ride a bike to go from one point to another. As you get more used to commuting, you will find that these activities can help you lead a healthy lifestyle, too.
Shopping – Learn to use coupons to save on groceries! Instead of going for a branded outfit, thrift stores often have good items that can compliment your style. If you need to buy something, stick to a list of your necessities. While it’s tempting to splurge a bit, you will find out that allowing yourself some room to spend can be a bad habit. Meanwhile, it’s easier to buy books via the Internet. Other students who no longer use the book you need can be found selling for a cheaper price than brand new books.
Entertainment – Yes, even college students have the right to party, but getting wasted is not an option. Being drunk can cost you a lot of money, as you’re not in the right state to make sound decisions. Aside from partying, you’ll find that there are other activities you can join to make the most out of your college life. Before you purchase a book, look it up on the library first. You can always borrow a book instead of shelling out hundreds to read it. Cut the cable subscription as soon as you can to avoid incurring expenses. If you’re on a postpaid line, switch to prepaid.
Living – If you’re still living in your home, you might find it efficient to declutter your things. Decluttering helps us discover old treasures we might need, or might be needed by somebody else. Sell the things you no longer need to earn money. On the other hand, if you’re running some errands, learn to group them together so you can perform each task efficiently. If you need something, a quick Google search will yield hundreds of DIY guides to help you save money.