The Essentials of Paying for College
When students transition from high school to college, they start to take on more of the trappings of adult life. They’ll be able to get up when they want, go to class when they want and eat pizza and mac and cheese for every meal, if they really want. But students in college are also expected to manage money like an adult, and to make good decisions that could help them succeed in the future. Unfortunately, when it comes to properly managing college finances, some students are far behind the curve.
A 2011 study by Charles Schwab (as reported by U.S. News and World Report) suggests that the majority of high school students want to learn more about money management, so they can track their expenses more effectively.
Unfortunately, it seems that few students get this kind of education, as many of them experience financial difficulties during their time in school and in the years that follow.
14.7 percent of students with educational debt defaulted on their student loans within the first 3 years of repayment. Source: U.S. Education Department, as reported by Bloomberg.
Students want to learn, and they certainly need to learn, so wouldn’t it be reasonable to expect their high schools to pick up the slack and promote financial literacy? In a perfect world, that’d be true, but unfortunately, few institutions offer, or are able to offer, that sort of education.
Studies like this seem to suggest that parents must teach their children about financial concepts, since it’s unlikely that schools will provide these lessons.
Only 32 percent of households have a monthly budget they follow.
Just 30 percent of households have long-term financial plans in place.
Fewer than half of those with college degrees keep tabs on financial data
Common reason given for budget skipping: the money is spent no matter what
By letting apps lead the way, students may gain control over their expenses and learn more about money management in the future. But there are also some low-tech options available.
Pay all essential bills at the beginning of the month.
Develop a weekly food + transportation budget.
Carry the funds in that budget in cash.
Stop spending when the money runs out.
A system like this keeps students from overspending, and it can result in savings. For example, The Washington Post suggests that businesses are allowed to charge a 4 percent fee on credit card transactions.
Students can also control their finances by looking for ways in which to scrimp and save. Shopping at thrift stores, eating in instead of paying for restaurants and biking instead of driving can all help to make life less expensive. There’s no shame in taking these steps either, as Deals.com survey data reported by AOL suggests that surprisingly wealthy people take steps some might consider thrifty. If you live beneath your financial means, you will only see your net worth grow. Also, shoppers with college degrees are more likely to use coupons.
Chipping away at expenses, creating a budget and utilizing financial planning software can be vital steps for some students, but there are other goals all students should keep in mind as they plan for their financial future.
Source: The National Center for Public Policy and Higher Education
Staying in school sometimes means borrowing more money, and sometimes students have to borrow at high interest rates in order to get the funds they need. Getting a loan from a private source isn’t bad, as private loans can provide necessary funding when federal and institutional aid are not available, but in any situation a student should carefully research their loan options.
Finally, students should be sure to watch their accounts closely, and be wary of funds or penalty fees. Overdraft charges, in particular, can take a huge bite out of a student’s budget. Although the median overdraft fee charged is $34, the average account that had at least one overdraft charge typically averages $225 in fees per year.
Students who continually rack up charges, or who are considering taking out high-interest loans in order to stay in school, should visit their school’s financial aid office. Financial aid advisors can help students parse through the maze of financial aid options, hopefully making the process of paying for college both easier and more affordable.
Paying for college is intimidating. We all know that an education isn’t cheap, no matter what school you go to. But there are a wide variety of resources that can help you make sense of the paying for college process, and even save money on the total cost of college. All it takes is some research and diligence, and we’re here to help.
Video guides, tutorials, and videos from the College on the Cheap street team.
Don Betterton discusses the hierarchy of loans and the proper approach to student borrowing with a group of parents of college students.
SimpleTuition asked a group of college students what their feelings about student loans and borrowing for college were. Check the video out to hear their comments and insights!
Monisha Perkash explains how to choose the right type of student loan for you, the differences between federal and private loans, and the importance of comparing your loan options.
College on the Cheap’s street team went back out for some more interviews, this time asking students if they knew what the consequences of defaulting on their loans were.
A group of parents of college students discuss their children’s college selection processes, and reflect on how finances played a role in the final decision.
In this new video, Don Betterton, financial aid expert and SimpleTuition advisor addresses the importance of having a personal budget.
College on the Cheap’s street team asked students if you have to pay back a grant – and refreshingly, almost all of them answered correctly!
Think you know the answer? Watch the video!
College on the Cheap’s street team interviewed some college students and asked them a few questions about loans, including what the difference is between subsidized and unsubsidized loans?
Saving for College
Tuition and Bills