Student Loan Dodgers

Most students leave college with some debt - whether it’s student loan debt or credit card debt. Additionally, students may take on other obligations - like rent and car payments - as they set up their new life after school.

All of this debt may seem overwhelming, or even downright depressing, but it doesn’t have to be. The best debt is no debt at all, but most student don’t have that luxury. If debt isn’t avoidable, make sure it’s manageable. Making debt manageable means living within your means.

While you’re in school, take stock of your borrowing habits and make sure you’re not taking more than you can repay. Currently, the average student loan debt is around $25, 000. If you’re considering larger-than-average loans that push your overall obligation higher than the average, proceed with caution! Your loans will most likely accumulate interest while you are in school, and you’ll end up with much more to repay than what you borrowed. Learn about your student loans and keep track of how much interest is accumulating while you study.

Don’t use a credit card as a substitute for cash! It’s not, and using credit in this way will likely earn you a lot of expensive debt. Credit should be used sparingly. If you’re issued a credit card, ask the issuer to limit the credit line to an amount you can likely repay within a few months. Use it only for emergencies and pay the balance off at the end of each month. If your credit card balance gets ahead of you, stop using the card until you can pay down the balance.

Make the most of Federal student loans. Everyone is eligible for them and they carry a much lower interest rate and more favorable repayment terms than non-government loans. They do have lending caps, so borrow carefully. Also put some effort into finding scholarships. You may need to spend significant time doing research, but in the end, the process should pay dividends in two ways: first, if you’re fortunate, you’ll turn up some free money for college. Second, you’ll hone your research skills, which will come in handy for your classwork.

Learn about the starting salaries for jobs in your field of study and determine whether or not you can make big loan payments on what you’re likely to be earning. If the answer is no, let that serve as a guide for how much you can safely borrow while you’re in school. If you still can’t make ends meet without borrowing heavily, consider transferring to a less expensive school, or one that’s closer to home. Most students get themselves into borrowing trouble by trying to cover their living expenses with loans. A better approach is to live conservatively and work part-time to earn the cash you need to get by. Work full-time in the summers and save, save, save.

Debt can be managed if it’s accumulated carefully and with consideration for how much you can reasonably expect to make after college.

Many high school students don’t realize that they can enroll and take classes at their local community college while they’re still in high school. This ability to dual enroll can save money and time, and can make the university admissions process much easier.

By taking one or two basic college level courses per semester, and one class during the summer during the junior and senior years of high school, prospective university students can eliminate a full year (or more) of university level classes. This strategy will offer two benefits.

First, students can fulfill general education requirements at their local community college at a much lower cost than they can if they wait to take similar courses at the university level. By taking one college course per semester, the academic load is easier to manage. Evening classes often meet just one night per week, leaving time for extra-curricular activities and regular high school homework.

Second, by accumulating college credits while still in high school, students can achieve “transfer student” status. This eliminates the need to compete with other incoming students for a spot in the freshman class. Universities can be more flexible about admissions to their sophomore and junior classes, since they typically don’t guarantee housing for transfer students. Universities may still apply on-campus housing requirements for non-commuter students who are not 18 years of age, so check with the universities you’re interested in before adopting this strategy.

If you’re already in a four-year institution, check out your community college options. If a two-year college is nearby or you plan to spend your summers at home, take courses at the community college over the summer and transfer them back to your four-year institution in the Fall to eliminate the general education requirements. Like four-year colleges, community colleges often offer shortened summer semesters, meaning that you can complete a 15-week class in half the normal time.

Leaving college with a mound of debt and trying to pay it back on an entry-level salary can leave a lot to be desired. If making ends meet isn’t a good enough reason to manage your borrowing in college, try this one on for size: the reality of loan repayment may prevent you from going into the field of your choice.

A study conducted by Public Interest Research Groups show that 37 percent of public university grads and 55 percent of private school grads face an unmanageable debt load, meaning that student loans would take more than 20 percent of their expected after-graduation salaries. As a consequence, these graduates may not be able to enter their chosen professions because they cannot afford to pay their loans back on the salaries they can reasonably expect to receive.

The problem is partially attributable to the high cost of college education and the limitations on financial aid. These factors often combine to force students to borrow to complete their degrees. Additionally, incoming students do little research on their chosen professions while in school to determine whether they can make a living in the fields of study they’re choosing.

Before declaring a major, students should fully research the employment potential of the fields they are considering, and should also research which fields are expected to be in demand over time. The Bureau of Labor Statistics makes 10-year employment predictions. Students can consult the BLS Web site for more information on employment projections. In addition to employment projections, the BLS also makes wage projections for hundreds of occupations.

Students should be leery of overly optimistic salary projections. Salary is often dependent upon region, so a student’s preferred location should also factor into the research.

If a low-wage occupation is still appealing, try to study at a public college or university. The overall costs here are often substantially lower than those at a private college. Examine 2-and-2 programs or 3-and-1 programs that combine community college and university studies. Attempt to finish a degree as quickly as possible to take advantage of lower tuition rates, and try to limit borrowing to Federally backed loan programs. With new loan regulations, your loans may be dischargeable after 10 years of service in certain public sector occupations, like social work, law enforcement, education, and rural or underserved health care delivery.

You know the old saying: “It pays to comparison shop.” The saying is true, and it applies to more than just goods in the stores. It also applies to student loans. Saving a quarter-point on interest rates over the lifetime of a 10- or 20-year loan can mean huge savings for borrowers, so it definitely pays not only to comparison shop, but also to take advantage of whatever incentives you can find that will reduce your interest rates and eliminate fees.

New student loan lending regulations may be making it harder for students to do some quick but effective comparisons on student loan rates. Since October 1, colleges and universities, which had provided “preferred lender lists” to students must provide prospective borrowers with multiple lender options, if they still want to make recommendations. Some colleges and universities have shied away from this approach to avoid future problems with government regulators.

Unfortunately, the college or university is one of the places students often turn to for assistance in finding financial aid. In the absence of direction from a student’s college or university, students must do more research on their own, which doesn’t often produce the most cost-effective options for students.

To get the most of out of the process, students should take the time to compare student loan rates. The rate, along with a loan’s fees, will determine how much comes out of a borrower’s pocket when the loan enters repayment. Colleges and universities sometimes take other factors into account, like loan servicing, when considering lenders. These other factors may or may not be of value to you, and you may not want to pay premiums for these services. On the other hand, you and your lender are going to be together for awhile, so you might want to consider some of the differences between loan products that may reduce or increase your loan costs.

Aside from the interest rate on a loan, consider the impact of interest rate reductions for direct debit/automated payments for your loans. Be sure to calculate the discounts over the loan’s lifetime to see if this approach makes sense for you. Check for other benefits like on-time payment incentives, fee refunds and other events or actions that may trigger credits to the borrower. Determine what’s most important to you and rate your prospective lenders accordingly.

You’ve heard stories about young college students who have amassed thousands of dollars in credit card debts, and you don’t want to join their ranks! How can you avoid falling victim to the credit card trap while you’re in college?

The more you know about money, credit cards and debt, the better off you’ll be. First, look at what you’re spending. Research conducted at MIT shows that study subjects paid as much as 100 percent more for purchases made with credit cards than they did for purchases made with cash. The research shows that we look at credit card purchases differently than we do those made with cash. Since the payment for the purchase is delayed, we often give ourselves permission to spend more, knowing that we will not be impacted immediately by credit purchases. To get a handle on where your money is going, try going on an all-cash diet for a while.

This approach works, even for those who pay off their balances in full every month. The over-spending isn’t tied to the extra interest charges, but rather to the lag time between the purchase and the payment. By paying for everything with cash, you’ll catch a lot of passive overspending that you may otherwise not even notice.

If you don’t know how to handle cash, learn! Start out small, by managing a checking account. If you are not confident in your ability to do that, ask your bank or credit union for some assistance. They may have consumer education programs that will cover the basics, as well as more in-depth information about money management and long-term savings and investment strategies that you can put into action. If not, check the local community college to see if it offers a course or two on personal finance. You may also be able to find on-line courses that will help you understand the importance of managing money correctly, saving and investing.

Don’t make the mistake of thinking that you need to have a lot of money to invest. Small, regular investments will often take you farther than larger, irregular investments. Many mutual funds, brokerages and banks have regular investment programs that will accept small regular deposits. Having a savings cushion is essential to financial security. Your savings account will help you cover unexpected expenses, but many people try to get by without one, reasoning that they can’t “afford” to save. In reality, few people can afford not to set aside some cash for a rainy day!

Learn as much as you can about finances, and you’ll be measurably better off. Managing your money is often more about managing your spending than about managing your funds. Recognize those spending habits that cause you to shell out extra cash and eliminate them whenever possible. You’ll be doing yourself a great favor and saving yourself a bundle in the process.