6 Ways to Avoid Major Student Loan Debt for College Students
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! For more money saving tips, click on Amazing Insider Secrets: 1703 Money Saving Tips by Jeff Bredenberg. 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 or 7 Tips for Saving Money on Cooking at Home.
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.
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!
What have we missed? I welcome your questions and comments on these ways to avoid major student debt for college students below…
And if you’re a college student who likes to party, you might find 7 Money Saving Tips for Extroverts helpful!
Bills.com is a free website for people to learn about personal finance issues, credit cards, debt relief assistance, insurance, mortgages, and other loans.
Do you have a poor credit report? Sky Blue Credit Repair is an awesome program that helps with credit repair, including credit bureau disputes, debt validation, and comprehensive counseling services. This program is ideal for anyone interested in real and lasting credit improvement.
Comment by Arsento on 20 August 2009:
I can’t afford to pay for even my first year of college without getting a student loan, but I know that debt is bad. I don’t buy things I don’t need — I don’t even own an ipod. I just can’t find a good paying job, and I want to go to school.
I applied for a student loan and got it, but I don’t want to go into debt. I think I might forget about college this year, and work instead. Save up enough money so I don’t have to get a student loan. When I have enough to pay for tuition, books, and rent then I’ll apply to college.
This sucks.
Comment by Laurie Pawlik-Kienlen on 20 August 2009:
Hi Arsento,
A student loan for college is an example of good debt! Some types of debt are actually investments in your future, which means they will earn you money in the long run. I’ve posted a couple of articles about “good debt versus bad debt” here on Quips & Tips. Here’s the link to one:
The Difference Between Good Debt and Bad Debt
Both my husband and I took out student loans to go to university. We both had our loans paid off within 2-4 years of graduation.
Sure, it’s a drag to have to take out a loan for college….but I think it’s better to get a student loan and get your degree or diploma than to work for years to try to earn enough money to put yourself through college.
Even though I had a loan, I also worked 2-3 shifts as a week as a waitress throughout university. My husband worked as a bartender. If you can get a job serving tables, the income from tips can be very high.
I encourage you to think about keeping your student loan and going to college this year. Of course, I have no guarantees about your future! But, usually an education pays for itself in more ways than just financially.
Good luck,
Laurie
Comment by janice on 20 August 2009:
I’m still paying my student loan after 10 years, but it was worth it. I haven’t made it a priority to pay it off faster than the normal payment schedule.
Comment by Give Blood Donation on 24 August 2009:
Looking for a part time job? Why don’t you try a blood donation. I think this is a very big help for college students who need extra money and can make up to $50/hour for blood donation. As we all know, blood bank shortages kill tons of people all the time and it is time to spread the word about blood donation and give blood, you will never know when YOU might need blood. This is really big help even it is just a part time or just once in while, the bottom line of this is to save lives.
If you are thinking to be a blood donor and looking for specific blood banks and directory you can check it out at bloodbanker.com.
Comment by Laurie Pawlik-Kienlen on 24 August 2009:
Interesting idea…I hadn’t thought about blood donation to make money to pay off a student loan, or earn extra money for college. Here in Canada, people volunteer to give their blood away…they don’t get paid for it. People get paid for donating blood in the USA?
And Janice, thanks for your comment. I’m glad your student loan was worth it!
Comment by Richard on 10 November 2009:
Every student should read this. Too often, kids exit college and are strapped with massive tuition debts. These suggestions will help them!
Comment by Laurie Pawlik-Kienlen on 12 November 2009:
Thanks for your comment, Richard…unfortunately, student loans seem like those “necessary evils” for many college kids! But I’ve learned that some students spend their student loans on non-school stuff (electronic equipment, cars, tools, etc)….which doesn’t make me feel as bad for them when they leave college and have to pay massive tuition debts.