College can be expensive, and some college students add to the price tag when they make financial mistakes such as using student loan money for a trip. Another mistake some make is going to a pricey college for four years when they could go elsewhere for two years and transfer. Here is an exploration of these mistakes.
Using Student Loan Money for Unintended Purposes
Many times, students have money left over from their loans after tuition, room and board, and other direct expenses are taken care of. These loans are supposed to cover educational expenses and educational expenses only. Related expenses such as essentials for a dorm room could be okay. But a vacation during spring break or splurging on renting a high-end place — most likely not. Yet, quite a few college students see that leftover money as “free money,” not realizing that years of compounding interest rates could end up doubling the price tag of that spring break trip.
The solution is usually to anticipate your expenses well and to accept only that amount of student loan money. If you don’t have the money, you won’t spend it.
Not Taking Advantage of Financial Opportunities
Going to college inexpensively has become trickier, but there are still some ways, especially if you live in certain states. For example, community college students in Tennessee, Rhode Island, Oregon and New York will be able to attend for free by 2018 (or are already able to), provided that they meet residency requirements, GPA requirements, income requirements (sometimes) and a few other regulations.
Some other states also have similar programs. For example, tuition in Minnesota is free if you study a high-demand subject. California also gives one year of community college free, and low-income students have been able to attend with their per-credit fees waived since 1986. Virginia’s community college students get a $3,000 annual grant when they transfer from a state community college to a participating four-year college. In short, ways to save can be found in many places, cities and states.
What does all this mean? It means that some college students who aim for four-year degrees should seriously consider attending community college first and then transferring to a school offering a bachelor’s program. The difference could be many tens of thousands of dollars and paying off student loans much more quickly.
College Students Using Credit Cards Irresponsibly
Some students graduate owing as much as $7,000 on their credit cards; the average student graduates with $3,000 in the negative column and has four or more cards, according to Sallie Mae. College is the first taste of freedom for many students, and even those who charge only $20 here and there, or even just $500 a few times a year, could find themselves at risk of hurting their credit scores sooner rather than later.
After they graduate, they may be looking for work while juggling obligations in the way of rent, student loans and credit cards. It takes just one missed payment for a credit score to suffer.
Responsible credit card use in college often means:
- Having a sound reason for getting a card
- Using a card with low credit limits and interest rates, and no annual fee
- Paying your balance fully every month
- Having one card
- Charging something only when you know you can afford it
- Being the sole user of your card (not lending it out to friends)
- Not getting cash advances
If you think you may be prone to abusing your credit card, go ahead and close the account. On the other hand, if you have already graduated, credit repair services could help you get back on track.
College should be a time of great freedom and learning. Making good decisions can set you up for life, but it can take only one financial misstep to hurt you.