If you’re a college student with a student loan, you may be facing huge amounts of debt by the time you graduate! These six ways to avoid major student loan debt are from Ethan Ewing, president of Bills.com.
Before the tips, a quip:
“The roots of education are bitter, but the fruit is sweet.” ~ Aristotle
The roots of education are also expensive…and hopefully the end results are worth it. Here’s one of the best tips for avoiding major student loan debt: read Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents by Zac Bissonnette. It’s a bestselling book on Amazon – probably because Zac isn’t struggling to pay back his student loans! Might be worth a peek.
And, read on for six ways to avoid major student loan debt for college students…
6 Ways to Avoid Major Student Loan Debt for College Students
1. Live within your means. Getting a student loan for college can be considered an investment in the future, but don’t go into deep debt to fund a lifestyle. “Plenty of people who have the latest fashions and tech toys, or drive the newest cars, do so under a tremendous debt burden,” says Ewing. “Staying out of debt is immensely more satisfying in the long run.”
For more money saving tips for college students, read 7 Tips for Saving Money on Your Grocery Bill.
2. Create and use a budget. No matter how much or how little income students have – and whether they earn it, have student loans, or receive money from their parents – get in the habit of budgeting. Here are four simple steps to creating a budget:
- Understand income. Add up all your incoming funds. Categorize ongoing monthly expenses into fixed expenses (like rent), variable expenses that are “must-buys” (food, gas, medicine, books, supplies), savings and spending money. The total is your cost of living.
- Subtract expenses from income. If that number (bottom-line cash flow) is negative, take a hard look at the budget and find a way to either increase income or reduce expenses.
- Map it. At the first of the month, map out a plan for spending in the coming month. That is your budget or spending plan.
- Save part of all income. Get into the habit of saving for the future. Try to deposit 10% of any paycheck directly into a savings or money market account. Your goal should be to accumulate enough funds to cover expenses for three to six months in case of an emergency. This emergency fund can help you avoid charging unexpected costs on your credit card.
4. Pay bills on time. To avoid the major student loan debt that many college students accumulate, make sure you open every bill as soon as it arrives, then pay immediately or create a simple system to it, whether with a folder on your desk or an online calendar. College students who are responsible for routine bills such as phone, utilities or rent can sign up for online bill payment, where automatic scheduling eliminates forgotten bills. Make sure funds are available in the account on the bill due date.
If you struggle to pay your bills and are creating more debt, read the Most Popular Money Articles – Financial Tips and Goals.
5. Pay credit cards in full. To avoid the major student loan debt that many college students accumulate, make sure you pay your credit card balance in full every month to avoid finance charges, build a good credit score, and stay out of debt. Paying less than full payment each month begins a cycle of fees that is difficult to end. In addition, paying less than the full amount means that the original purchase will end up costly significantly more than its purchase price (through interest rates).
6. Build and protect your credit score. A good credit score can significantly impact your ability to borrow money and the interest rate. Credit scores also can affect the ability to rent an apartment, lease a car, or even get a job. The first step is to monitor your credit reports. All consumers – including college students – can access credit reports once each year for free at Annual Credit Report.com. If your credit report shows any inaccuracies, correct them right away. Then make sure to pay every bill on time, all the time!
Don’t be afraid of getting a student loan – read 5 Reasons to Get a Student Loan If You Can’t Afford College.
If you’re not thrilled about going to college – but you want your degree or diploma – read 5 Ways to Stay Motivated to Go to College – From Bored to Inspired!
I welcome your comments on these ways to avoid major student loan debt…