Student Loan Dodgers

Yes, you can save money as a student! At the beginning of the semester, when you’re being hit with tuition bills, fees, books, supplies and household expenses, it’s hard to believe that you can actually save. One trick to saving money involves not spending it in the first place.

Books: The campus bookstore isn’t the only place to get your books. Find out what books your professor wants you to get and see if you can find a cheaper copy online. One caveat: take into account the shipping fees. Saving $10 on the cover price doesn’t help when shipping runs $15.

Transportation: Pare down your transportation costs by using mass transit, ride sharing, bicycling or walking. Take transportation into account when deciding where to live and work.

Food: Don’t eat out when you can avoid it. Make food at home. If you’re going to be on campus during lunch, bring food with you from home. It’s a lot cheaper and you can save hundreds of dollars each month by not eating out.

Cash: Save it when you get it. Save at least 10%-15% of your monthly spending money and forget about it. Someday, you’ll need it.

Credit: Bad idea if you’re not really familiar with how credit cards work. They open up a lot of buying options, but if you haven’t developed a keen sense of self-control, you’re going to be hurting in just a few short months. Figure out how much money you can safely pay back each month and don’t overspend that amount, no matter what the spending limit on the card is. Your goal should be to pay off your balance in full each month. If you like horror stories, check out the Frontline program The Secret History Of Credit Cards. You’ll never look at your credit cards the same way again.

Summer is prime time for student financial aid concerns. Students who are attending college for the first time are scrambling to get loans and aid in place before the start of the Fall semester. Federal and state departments, banks and private lenders are working to review applications and disburse funds before September.

Little attention is being paid to the cost of university expenses, which drive the ever-increasing need for financial aid. State colleges and universities are often pressured to keep tuition raises low, but face the prospect of stagnating or decreasing state aid. Therefore, the spiraling cost of education often falls on the students in the form of increased tuition.

How can students combat the high cost of tuition? A number of approaches can be used successfully to cushion the impact of college tuition increases. If time is on your side, saving for college is one of the best ways to reduce the need for aid. By using a 529 plan, parents can make regular contributions to a special savings account that is designated for qualified post-secondary education expenses. The accounts can be opened as soon as the child has a Social Security number, and have extremely high contribution limits. Contributions are made post-tax, and the accumulations can be tax-free, provided that they’re used for qualified educational expenses.

Taking money from a 529 savings plan amounts to using “free” money. It reduces the amount of aid a student needs and can be used for tuition, room and board, books, and fees. In other words, there is a broader range of “qualified” educational expenses that qualify for favorable tax treatment under 529 plans.

Using proceeds from the sale of savings bonds can also garner favorable tax treatment, but again, special rules apply regarding how the money can be spent. Consult a tax advisor or the IRS Web site for more information on tax breaks available for savings bonds.

Resident tuition rates at public universities and colleges are lower than non-resident rates. Attending local public universities is a great way to reduce the cost of going to college. Likewise, studying at a two-year college and transferring credits to a four-year institution can substantially reduce the cost of getting a four-year degree.

Borrowing to cover the cost of educational expenses and working to cover the cost of living is also another strategy that can reduce the amount of loan debt a student needs to take on. Before school starts in the Fall, make a budget that shows expected expenses and determine how much income and aid are needed to cover those costs. Stick to the budget as much as possible and develop a plan for covering unexpected expenses before leaving home in September.

Going to college is a major shift in the routine. It’s also a major shift in responsibilities. Managing finances can be tough, especially when you have so many other new responsibilities to juggle. If you don’t have any particular experience in managing finances, you could be especially vulnerable to some traps that can cause problems for years.

To avoid these financial pitfalls, consider the following five tips:

Create A Budget
A budget is a financial roadmap. If you wouldn’t take a trip to an unknown city without using a map, why would you set off into money management without making some plans? A budget is a money map, and can help you figure out what you need to make, save and spend. Don’t leave home without one!

Learn How To Balance A Checkbook
Open a checking account and start using it, but remember that you can only spend what you’ve put into it. Write down every check, fee and ATM withdrawal, all deposits and other additions (like interest) to your account. Do this every few days. Use your own receipt and don’t rely on the bank’s records. At the end of the month, make sure that your records agree with the bank’s. If they don’t, find out where you went wrong and correct the record. If the mistake belongs to the bank, notify the bank right away.

Learn How To Use Credit Cards
Learning how to use credit cards is more difficult than you think. Paying for stuff with a credit card is easy. Paying the bill for the stuff you bought … not so much. Figure out how much you can comfortably afford to put on a credit card each month. Keep track of your expenses and know how much the bill is going to be before it shows up in your mailbox. Know when your payments are due and set up an automatic payment for your card to avoid late fees.

Work!
Taking a part-time job can help with unexpected expenses and can help defray the cost of living. You can also practice the lost art of saving. Don’t make the mistake of saving the leftovers – there won’t be any! Instead, take your savings off the top and make due with the rest.

Practice Discipline
Learn how to say no. Most of the expenditures you’ll consider will be optional. Learn how to pick the ones that are important to you and leave the rest behind. This is where your spending plan (i.e., your budget) will come into play. Let your budget be your guide when you’re considering a purchase. Beware the small purchases: they add up!

A recent study by GfK Roper Public Affairs and Media shows that 35% of Americans admit to carrying a balance on their credit cards, while studies by the Federal Reserve board and data released by credit card companies show that the actual number is nearly 50%.

A study by the Consumer Federation of America and Washington Mutual Bank showed that 66% of its 1,000 respondents carried a balance on at least one credit card. The CFA/WaMu study also showed that less than one-third of Americans understand the meaning of a credit score; fewer than 3 in 10 respondents knew that a credit score of at least 700 is needed for a low-rate mortgage; and more than one-third of respondents didn’t know that other industries, like insurance companies, use credit scores to determine coverage rates.

Lack of information can profoundly affect a consumer’s ability to get credit. More than 40% of consumers don’t understand that maxing out a credit card will lower a person’s credit score. Other additional trouble spots include not understanding that interest rates are often pegged to credit scores and that multiple applications for credit in a short period of time can lower the applicant’s chances of getting credit.

With so many people unsure of what their credit score is and how it affects them, one of the best things that new consumers (especially students) can do is spend some time learning about their credit scores and finding out what helps and what hurts. In most cases, knowledge is the key to developing sound financial habits. Unfortunately for most borrowers, although the information is widely available, few actually take the time to read what’s available and fewer still analyze the information to determine its impact.

If you’re just learning financial management, a good place to start is the student financial aid office. Since most of your heavy-duty borrowing will be related to your student loans, the financial aid office may have ready resources to help you understand what you’re borrowing and how those sums will accumulate over time. They can also provide information on how to limit your need to borrow and direct you to other sources of money for your education.

The next stop should be your bank or credit union. Often, these organizations will hold mini-seminars and financial planning workshops to help you understand how you can use their services to better manage your money. As a student, your institution may also offer a personal financial planning course that may assist you in understanding credit, debt and money management.

For some families with college –bound students, the question of room-and-board is converted to the question of whether it’s better to rent or buy. In certain college markets, renting a place to live close to campus is so expensive that buying a condo or home nearby makes more financial sense, even when real estate taxes, insurance, maintenance, upkeep and utilities are taken into account.

If you think your college town might fall into this category, do a little research to compare average rental and mortgage prices for properties in the area you wish to live in. Don’t forget to look at taxes and insurance. In some areas, property taxes are higher on rental properties. Another area of offset might be utilities. Apartments sometimes include utilities costs in the rent. The cost of transportation is also a factor, if the property isn’t close to campus.

You can offset the cost of the mortgage by renting extra rooms out to friends. This can be a tough call, since friends don’t always make the best roommates. You’ll also need to understand the real estate market in the area in which you’re buying. If real estate values are holding steady or even rising in the area, selling the property when you’re finished with it will be easier and will likely mean that you’ll recover some of your mortgage payments. On the other hand, if the market is down or stagnant, selling may not be possible, and you’ll be renting out the property from afar.

You won’t really know whether you’re coming out ahead in a rent-v-buy arrangement until after the fact, but owning an address in town could give you residential tuition rates if you’re attending an out-of-state public institution. Residential tuition rates can be substantially lower than out-of-state rates and the opportunity to take advantage of them shouldn’t be overlooked in the decision to rent-v-buy.

Another good argument for buying can be made by parents who have more than one child attending the same institution. It’s a convenient way to extend the family household and make a good investment at the same time.

Your college career can last for several years, and it’s a good bet that you’ll be taking student loans at some point. If you’re a smart borrower, you’ll want to keep tabs on your loan balances, and have some idea of what your monthly payments will be when you graduate.

CollegeInColorado.org provides a calculator to help you do just that. The calculator can help you determine what your loan balances are, the rates at which your loans accrue interest, and how much you can expect to earn (and pay) after graduation.

Knowing where you stand when it comes to borrowing, and understanding how your loan balances change as interest accrues will help you keep a good perspective on how much you owe, and how much you’ll need to make to cover your loan payments after you graduate.

As you work your way through college, try to keep your borrowing to a minimum. As always, exhaust all of your Federal borrowing options first. Be diligent about searching for scholarships and grants. Even small grants can translate to big savings when it comes to reducing the amount of borrowing you need to do. Borrow only what you need to get through school. For day-to-day expenses, use personal savings or take a part-time job.

Finally, don’t forget that credit card purchases are a form of borrowing. The purchases you make on a credit card will carry a high interest rate if you don’t pay the balance off in full at the end of each billing Avoid making purchases on credit. If you can’t do that, keep your credit purchases small and pay your balance off at the end of the month. If you’re using your credit card to cover purchases that your income doesn’t, you need to rethink your monthly budget. Remember: you can’t get ahead by running up your credit card balance!