Managing finances has always been a challenge for college students, who are often on a tight budget and on their own for the first time.
But in recent years, students are borrowing more to pay for college, resulting in skyrocketing loan debt. In fact, student loan debt in America exceeded $1 trillion in 2014 with more than 40 million Americans having incurred some of that debt.
Lew DeLuca, Southern’s new coordinator for student financial literacy and advisement, says that while loans help millions of students each year, it is important that they and their parents understand the ramifications of debt and what steps can be taken to minimize it.
“Students often don’t realize how much cheaper it is to save money now, rather than borrowing money and paying it back later,” he said. “Interest really adds up.”
He offers several suggestions to students and parents on how to keep this debt under control:
*If you receive a refund from your financial aid office (because costs sometimes turn out to be less than the amount of money requested in the loan), give serious consideration to paying it back. While it may be a lot more fun to use that money to go on a trip or buy various items, you can reduce the long-term pain of debt if you sacrifice a little now. Remember, if you didn’t get the refund, you might not ever miss it. DeLuca acknowledges that there are circumstances when students genuinely need the refund money for expenses. But if it is possible to pay at least some of the refund back, do it.
*Do your best to graduate in 4 years. We know this is not always possible. Some students switch majors, or may have major or diploma requirements that make this difficult. But consider taking classes in the summer or winter, if possible, especially if you find yourself behind in credits. DeLuca says the cost to attend one additional year at a college or university is substantial. “You not only have the tuition and other expenses associated with another year at school, but you could be losing a starting salary for a year, or part of a year.” For example, if someone with an entry level job in your field would typically make $40,000, add that to the cost for another year of tuition, fees, books and other expenses. Typical college students could be looking at a real cost of $60,000, $70,000, or more. And if that job offers its employees a 3-percent raise after the first year, you would be losing out on that amount in subsequent years. “It really adds up!” DeLuca says.
*Try to keep your student loan debt to an amount that is less than the starting salary of your first job after graduation. Not only is this wise financially, but psychologically. To owe more money than you know you are going to make next year can be quite a psychological burden.
*Find a college that fits into your financial reality. There are many quality schools that are relatively inexpensive compared to others. This can be a good option for students, especially if you are interested in pursuing a particular program that has an excellent reputation at a less expensive college or university.
*Sound financial guidance can be money in your pocket. Don’t be afraid to seek financial advice from a reputable financial planner.
DeLuca was selected recently to fill the newly created position of coordinator of student financial literacy and advisement at Southern. The university financial literacy and advising webpage offers additional facts and tips about student loan debt.