Student debt continues to rise. The average college student has a credit card with a 3000.00 balance, and will graduate with about 24,000 in student loan debt. This combined with unemployment for graduating seniors at an all time high has resulted in an increase in not only student loan default, but a heavy financial burden that many young adults won’t be able to shake for decades. A recent study showed about 85% of college students moved back home with mom and dad after graduation!
The core problem is most students do not have proper financial and debt management skills.
The first thing one should do when deciding on attending college is figure out what you could afford if no loans were available. That might be enough to attend a state university or community college, which is worth considering. In any event, borrow only the difference. While college tuition has increased over the years, the main increase in student loan debt is additional funds borrowed for “living” expenses, instead of simply getting enough funds to cover tuition, books, basic housing, and food.
Next you must set up a budget. Even if you work while in college or receive money from home it’s easy to outspend your resources. Look at your expenses for an entire semester and divide by 17 to determine your weekly “allowance.” Keep receipts so you can go back and see where your money has gone and make adjustments. If you have a meal plan—use it. It is cheaper than eating out.
Don’t fall into the credit card trap. Limit your spending, and don’t fall into being pressured to spend more than you can afford. With the busy lifestyle of a college student, missing a credit card payment is easy. This will definitely lower your credit score and the negative mark will stay on your credit report for 7 years. Work a part time job if you need additional funds.
Finally take a finance class. Majoring in the arts or medicine is no excuse for skipping personal finance and economics classes. Take at least one so you can build a greater understanding of your finances, and see what this stuff is all about.
By taking the time to practice real life money management skills while in college, will reap you rewards much greater than most of your peers. Invest in yourself!