Student loan debt remains a growing concern for parents and for students looking to receive a quality college education. It’s so prevalent that students and parents take it as an “assumed” part of the college process in the United States. About 60 percent of students borrow from lenders each year to help cover college costs, and in Illinois, the average amount of student loans borrowed exceeds the national average of $24,000.2
While college freshman worry about how to decorate their dorm or selecting the best class schedule, David Diehl, assistant professor of accounting and director of graduate business programs at Aurora University and Aurora University Online, urges students to also prioritize their finances. Proper management of money, especially during the critical and expensive college years, can be crucial to successfully paying back loans and ensuring a great start post-graduation.
“The high rate of borrowing makes it imperative that students learn to properly manage their finances in the beginning of their college years, leading to healthy financial habits for the future,” said Diehl. “By managing finances at the start of their college years, students can potentially save money, as well.”
Professor Diehl insists the most important motto college students should follow is to “live within their means.” College is the first time many young adults are living on their own. It can be easy and tempting to spend money on food, clothing and more. Understanding early on what an individual’s budget is and how much one can spend outside of the necessities will help build a solid financial foundation that can lead to a secure future.
In order to establish a plan that will help students live within their means, Professor Diehl advises students to adhere to the following money management tips:
1. Explore Your Values to Define Your Needs and Wants: Consider your consumption of goods. Though you undoubtedly need some of those items, others are simply things you desire to obtain. Limiting your consumption of “wants” will help you reduce your costs dramatically.
2. Construct a Budget: Planning the inflow and outflow of cash, and sticking to the plan, puts you in charge rather than at the mercy of your finances.
3. Pay Yourself First: No matter the amount, get in the habit of saving each month.
4. Open Bank Accounts at a Reputable Institution: Checking and savings accounts are indispensable, safe places to store money. You are less likely to spend money in the bank than you are to spend cash. Banks also offer a convenient gateway to free or low-cost financial advice. Remember to choose banks that have low fees. Also ask for student accounts that may even be fee-free.
5. Avoid Credit: It’s easy to spend with credit, but hard to pay it off. A credit balance where someone has to pay the minimum each month could take as long as 30 years to pay off. If you must have a credit card, select one with low fees and interest rates, a low credit limit and reserve it for special needs. If you use a credit card, pay it in full each month.
6. Get a Part-Time Job: Studies show that students who work less than 20 hours per week are more successful than those who don’t work. That part-time job may also cover most, if not all, of your discretionary expenses.
7. Don’t Take More Student Loan Funding Than Needed: Remember that every dollar of student loan funding must be repaid with interest. Taking sufficient, but not extravagant, loan funds will help you keep post-graduate payments reasonable.
8. Look for Deals and Buy Used: There are deals for students abound. From entertainment, to food, to books, seek out low-cost alternatives. Textbooks can be rented, purchased used, selected in electronic formats or borrowed. Make bargain hunting a fun part of shopping.