Be Loan Smart
Tips for managing your student loans
There are countless college graduates who, looking back on their time at school, wish they could change one thing: how they managed their student loans. Some wish they hadn’t borrowed so much; others wish they had spent the money differently. Because of their lack of foresight at the time, these individuals end up struggling to pay off their loans later in life. Some end up in worse financial shape than they were during their cash-strapped student days.
Follow these simple rules while you’re still in college and you can avoid getting into debt trouble after graduation:
- Only borrow what you need. Calculate what you expect your annual expenses to be and base your loan request on that figure. Just because you are offered a huge sum of money doesn’t mean you should take out a huge loan. Always remember that the amount you borrow is not the amount you pay back. Most people end up paying around 30 percent more than they borrowed in interest. That’s a lot of money.
- Use loans for school, not fun. Never borrow money for anything other than essential expenses like tuition and books. Under no circumstances should you be using your student loans to pay for something like a shopping spree or a vacation.
- Increase your income. It can be hard to do, especially if you’re in a rigorous program of study, but you should try as hard as you can to earn money during the school year. Income from a part-time job can pay for luxuries like clothing and entertainment. During the summers, work as hard as you can and save as much money as you can. You may have to sacrifice some aspects of your social life to find time for a job, but it’ll be worth it in the long run.
- Manage the money you earn wisely. Don’t squander the money you earn. Every dollar you save (rather than spending it on something you don’t need, such as another round of drinks at the bar) means one more dollar that can be put towards paying for school and one less dollar that must be borrowed in the form of a student loan.
- Be get ahead of yourself. Never borrow based on the salary you think you'll earn after you graduate. There’s no guarantee you’ll land a high-paying job.