College is an exciting time. However, it can also be hugely expensive. Here are some things to consider when thinking about borrowing money for college.
What You Should Know Before Borrowing Money
- The cost of college: College graduates earn a greater annual income compared to those who only hold a high school diploma. However, it is also important to consider that the cost of college has increased by more than 25% over the last 10 years.
Furthermore, lack of state funding has put more pressure on students to save and support themselves. From the cost of health-care, transport, school supplies, and accommodations away from home, college students are faced with problems inside and outside their textbooks.
- Only take what you need: The higher the loan you take out, the higher the overall debt you will have to pay off once you have graduated. Therefore, it is important to understand the variety of funding options and budgets when possible to minimize the amount of student loan repayment.
- Understand how interest works: Once you have agreed to take out a loan, you have committed to pay back the sum plus interest.
Despite varying rates of accumulation, your initial borrowing amount will always compound over time, so it’s best to pay off your loans as early as possible. Paying off loans which are due earlier will mitigate extra debt from interest.
- Understand different types of loans: Out of around 20 million college students, around 60 percent borrow money to support themselves throughout higher education.
Federal loans are the most popular type of loans taken out because they are typically offered at fixed rates with low interest. However, some students may be ineligible because of factors such as citizenship status and insufficient academic performance. Private loans are an alternative but usually come with added interest rates and terms, such as borrowing limits.
Compare and familiarize yourself with different student loan lenders to find a loan appropriate to your circumstance.
Tips to Pay Off Your Student Loans Before You Graduate
- Apply for grants and scholarships: Most colleges offer scholarship programs which can save you thousands of dollars. Scholarships are awarded by criteria based on financial need, cultural and ethnic background, as well as academic achievements, and other talents deemed desirable by your chosen college.
- Get a job: Although balancing full-time education and part-time work is challenging, there are a range of flexible work opportunities to consider when looking for extra income.
College-set jobs on-campus are not the only accommodating employers out there. Paid internships not only provide extra cash but may offer more relevant work experience to set you aside from other graduates.
- More money saving tips: Budget, budget, budget! Not only should you be trying to manage incoming funding, but it is just as critical to save the money you earn. Reading blogs and using budgeting apps can help you promote money saving habits to minimize over-spending.
If you live off-campus or away from home, consider sharing accommodation with friends to minimize the leisure cost when hanging out. How about having coffee at home or saving transport cost by carpooling onto campus. Together, you can also try to save on household expenditures. For example, switching power companies which offer a more competitive rate.
Minimizing recurring subscriptions, such as gym memberships and streaming services, can also cut down on accumulating monthly costs. By doing home workouts or sharing costs of subscription accounts, you not only have fun but encourage money-saving behavior with your social network.
Knowledge is wealth. This pursuit of knowledge should start way before the first day of college – starting with researching the best ways to minimize accumulating debt. By following these tips on managing personal finance, you’re a couple steps closer to graduating debt-free.