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Debt Management for College Students

college student

When you are a student in college the last thing on your mind is saving money, debt management, the wise use of credit, and pretty much anything having to do with budgeting or finances.

But college can actually create a financial future full of debt and doubt, if you aren’t careful. You’ll receive many credit card offers in the mail that seem too good to be true, that’s because they are. Read the fine print! If you’re not cautious you could wind up with more debt than just your student loans after you graduate.

Here are some great debt management tips for college students:

1. Get a Good Grip on What You Owe (Budgeting):

As a college student, budgeting is one of the most important tools that you can learn. Practice disciplined money management by creating a budget that is realistic and one that you are able to stick with. Remember, sacrificing now and living within your means will make it easier for you to get out of debt faster once you have started on your career path after graduation.

2. Smart Debt vs. Not So Smart Debt (Credit Cards):

One of the biggest temptations for college students is signing up for and using credit cards for everyday purchases. College students are magnets for credit card offers. The lenders know that most college students have good financial prospects for the future, as well as a present need for money.

It’s very important to control credit card use for good debt management. As tempting as it may be to use a credit card to go out to eat or buy new clothes, it’s a better idea to curb almost all credit card purchases. The interest on credit cards makes whatever you are buying cost way more than the price tag. Credit cards make it super easy to acquire unnecessary (not so smart) debt. Also, once you graduate from college, you will most likely have student loans to pay off. By adding credit card debt to all of that, you are risking your financial future.

3. Start to Payoff Interest Right Away (Student Loans):

Student loans can be a common way to pay for college. Choosing the right student loan is very important. Student loans are generally considered smart debt because of the asset that college gives you (a college degree). Not only is it a valuable learning experience, but it helps with your employment opportunities. Student loans, especially those from the federal government, usually have decent terms. It also helps that the interest from some of these loans is deferrable.

For example, Subsidized Stafford Loans do not require repayment of interest until after you’ve been out of school for 6 months. However, these loans are “need-based”, so they may not be available to everyone. Unsubsidized Stafford Loans are not “need-based”, so interest will accumulate straight away, but they still have low rates (3.86% for 2013-2014).

It can help manage your debt to make interest-only payments while you are still in college. You’ll want to speak to your loan service provider about this. Since the interest will begin to accumulate anyway, making payments while still in school will help you chip away at the interest.

4. Build up Emergency Savings (Interest-bearing Account):

Redirecting money away from paying down student loans to create an emergency savings fund might sound counterproductive, but having an emergency fund is very useful in avoiding the need to put a surprise expense on a credit card. Once you have all of your credit cards paid down, keeping them paid off every single month is the best way to handle debt, and an emergency savings fund will make it easier to handle substantial unanticipated costs.


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