Student Life & Debt
It's easy to rack up debt when you're a student. You may sign one promissory note after another without really realizing how much educational debt you're racking up. Meanwhile, purchases like books and groceries may go on a credit card. That means that graduation may find you may thousands of dollars in debt. Borrowing wisely during your educational years, on the other hand, may allow you to keep as much of your paycheck as possible once you get that first, entry-level job.
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Educational Debt
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Sometimes it's impossible to avoid taking on student loans. However, some educational loans will cost you much more than others. Whenever possible, avoid private educational loans, which tend to have higher interests, in favor of government-backed ones. If, after borrowing from Uncle Sam, you find that you're still short on money for the semester, consider taking a part-time job instead of another, pricier loan. Scholarships and grants, while often requiring lengthy applications and essays, are another way to avoid loans.
Credit Card Debt
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Students who are new to credit card usage may easily misuse their plastic, racking up more than they can afford to pay back. The problem with credit cards is that they're too easy to pull out when there's no cash in the checking account. Yet that pizza and beer you purchase with plastic can cost you a lot more when the credit card comes with a 21 percent interest rate and you can't afford to pay the balance in full each billing cycle. The solution is simple, though for many, not easy: put away the credit cards somewhere safe and out of sight, so you won't be tempted to use them. Rather, keep them around just for emergencies.
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Role of Budgeting
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Students often underestimate how much things cost, including groceries, utilities and other common bills. They also tend to spend on social outings, but even small expenses like a beer here and a beer there can add up over the course of a month. Keeping debt down requires living within their means, and a budget can help them do that. It's important to scrutinize actual monthly expenses to come up with a projection of future expenses and find areas where savings can be achieved.
Paying Debt Down
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While it may be possible to borrow wisely and keep debt relatively low during your years as a student, it may not be so easy to pay down debt, unless you're willing to take on part- or full-time employment while also attending school. However, once you graduate and get a job in your field of study, you can pay down debt quickly by focusing on becoming debt-free, rather than spending on new cars, vacations and other such luxuries.
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References
- Photo Credit college image by Chad McDermott from Fotolia.com
