As the cost of college continues to increase, more and more students are needing to take out student loans. The national student loan debt has risen to an unprecedented amount — just over $1.6 trillion as of 2019. This is why it is of the utmost importance that college students learn how to manage and minimize their debt, both before, during, and after their time at university.
Learning how to manage your student loan debt can teach you personal finance skills — such as making a budget, sticking to a repayment schedule, and managing your credit — that can benefit you for the rest of your adult life. Below are some ways you can prepare your finances for student debt, minimize the amount of debt you take, and manage your repayment.
A key part of minimizing your debt and making college more affordable is to start preparing financially well before you go to school. This can take a lot of forms — such as a college savings account, applying for scholarships and grants, or making a savings plan. Whether you’re right out of high school or you’re returning to college later in life, there are several ways you can establish a successful financial plan as you start school.
Saving money can sound like an obvious strategy. But without a proper savings plan — covering things like how much you should save, what does your budget allow, and how you’re going to save the money — your savings practice could fall apart quickly and end up not being as robust as it could be. Take some time to research some savings strategies for prospective college students as you’re making your plan, to ensure you get the most out of your money.
If you’re still in high school and have the option to take AP classes, this is a great opportunity for you to save some money and time before heading to college. Many AP classes go towards college credit once you pass the AP test. They’re also typically offered at a discounted price for high school students. This can reduce the number of classes you need to take in college, as well as prepare you for college-level curriculum.
In addition to savings and scholarships, you should research the other college financing options. These include:
Before you apply for any private loans, you should fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA will tell you what federal assistance you are eligible for, including state and federal grants, loans, and work-study, as well as how much they’re offering.
You don’t have to accept all the aid that FAFSA offers you — although, federal grants and work-study are always excellent options to take whenever they’re offered, as they don’t involve repayment. FAFSA’s breakdown can help you budget more effectively, as you’ll have a clearer picture of what funding is at your disposal.
Similar to grants, scholarships are a great way to fund your education without having to worry about repayment. There are thousands of scholarships available for all kinds of students studying or hoping to study in all kinds of fields.
State education boards will often have scholarship listings that are specific to your area, and the university you’re applying to will most definitely have a scholarship office at which you can search for opportunities, as well as ask questions. Many scholarships require essays, so it pays to do some research on how to write a strong scholarship essay.
When you’re looking at colleges, it’s important to consider not just what you want to study and where, but the cost discrepancies between different kinds of colleges. For example, in-state schools often offer cheaper tuition for residents than out-of-state schools, and private universities are more expensive than public universities.
Learning the difference between for-profit and non-profit colleges will help you understand how your tuition money is being spent, or why tuition prices may increase. Considering these factors doesn’t mean you have to sacrifice your dream school — it just means that your budget should factor into your college choice as much as your educational desires.
What we’ve discussed above are great ways to save money and reduce debt before heading off to college. Nevertheless, college is a long-term commitment, ergo you will need to develop ways to save money and reduce debt while you’re attending school. Here are some money-saving strategies that current students can use to improve financial health while pursuing a degree.
Virtually everyone can benefit from having a budget to manage their everyday finances. It’s especially important to have a comprehensive budget when you’ve got debt, such as student loans. Crafting a budget may seem difficult, but there are some easy tips that can help you make a personalized budget that suits your lifestyle and factors in your debt:
Several local, and even national, businesses and services offer discounts for current college students. Taking advantage of these discounts is a great way to save some money on your day-to-day spending. There may even be places on campus that you can cash in a student discount, such as sporting or cultural events. This is a great reason to keep your student ID on you, as the next time you’re at your local coffee shop or bookstore, you might be able to save a couple of bucks.
Many students take classes over the summer to save money. These classes are often cheaper than they would be during the regular school year, and operate on an accelerated curriculum, so they tend to only run for a few weeks. You can take these classes online, through your university, or at a local community college. They can potentially help you graduate early, saving you more money in the long run.
However, if you take summer classes from another school, make sure that your credits are transferable to your home university.
Working part-time is a reality for a lot of students getting their degree, either through work-study or at an off-campus job. While working in college can help offset your costs, you should think about getting a job carefully, as not every student will be able to balance a dual commitment. The best thing you can do if you’re working in college is to try to find a boss that will be flexible around your school schedule, so you can still put your education first.
Whether or not you work part-time during school, you could also consider finding a side hustle to earn even more cash. This could be a more sustainable alternative to part-time work if you don’t have much free time, or it could supplement your work schedule. Easy side gigs include:
These are just a few of the most flexible side hustles out there — if you’re creative and see a need you can fulfill with a skill or service, there’s really no end to what you can do to earn some money on the side.
Some large corporations offer partial or full tuition reimbursement for their employees looking to get a higher education. Some universities also offer this option for graduates who decide to work at their alma mater. Here is a list of corporations that offer some form of tuition reimbursement and their program requirements:
For the majority of students, student debt doesn’t end after graduation. This means that even after you’re out of college, it’s still important to maintain and evolve the skills you used in school to minimize and manage your student loans. Here are a few ways you can start.
First and foremost, you’ll need to start repaying your student loans — or at least make a plan to do so. Your specific loan terms will help you determine how much you’re expected to pay per month, as well as how long it may take you to pay back your student loans. If you can’t make your student loan payments, you may need to seek loan assistance.
If you’re unable to make payments on your loans, or your loans have gone into default, it may be worthwhile to look into loan assistance options to manage your debt. You have a few options when it comes to loan assistance:
If you haven’t already, you should start building your credit after graduation. Making routine monthly payments on your loans will help your credit score, but not significantly, and not if you already have a poor credit score. Building your credit is a great practice, as it opens up more refinancing opportunities for better loan terms should you want to consolidate your loans. Here are a few tips for raising your credit score:
Once you leave college, unless you’re planning on going back for an advanced degree, your next biggest savings goal should be retirement. Having a strong retirement savings plan can help you feel at ease knowing that when it’s time for you to exit the workforce, it can be on your terms.
Many companies offer retirement benefits for employees, but you don’t have to wait for a 401(k) to start saving. Setting up your retirement plan is another reason why it’s beneficial to be organized with your student loan debt — so that you can maximize the amount of time you have to save, and have the skills to balance two different financial goals.
Everyone makes mistakes with their finances at some point in their life, especially if you don’t have the resources to become independently financially literate. If you don’t feel confident about your finances, you can always find help. Enlisting the services of a financial planner, a credit repair company, or even taking personal finance courses can help you correct your financial mistakes, and keep you from irreversible financial damage.