Managing your money is about choices. What to spend? What to save? No matter how much money you have, establishing credit and getting into good habits early can make a big difference.
While it may be tempting to finance a certain kind of lifestyle while you’re in school, remember that everything you borrow will have to be repaid with interest. Set a student budget so you’ll know how much you can afford to spend, and stick to it. Get started with this college student budget planner worksheet.
It's a good idea to update your student budget regularly to accurately reflect what you earn and what you spend, particularly if your income changes from the school year to the summer. Once you have a workable budget, be creative about how you can save even more.
To minimize the amount of college loans you must borrow, consider using an interest-free monthly payment plan. This is an excellent option if you can contribute a little every month toward your college bill. Plans generally begin in June and may require a minimal enrollment fee. Contact the college bursar’s office for more information.
Credit can be an important financing tool, if it’s used well. Your credit report represents your full financial picture, including accounts that have been closed or repaid in full. Three credit reporting bureaus maintain your financial history: Equifax, Experian, and TransUnion. You should check with each of these bureaus annually to verify that the information on your credit report is accurate. Once a year, you may check for free.
Your credit score is a number that is separate from your credit report. There are many companies that will provide your credit score for a small fee. Lenders, landlords, and even some employers will check your credit score or reports. It’s important to know your credit score so that, if necessary, you can take measures to improve it.
Lots of factors are used to determine your credit score. Even borrowing an education loan can help establish your credit, especially if you repay on time, every time a bill is due. While credit scores are determined by complex calculation, you can follow a few simple tips to establish good credit (and good financial habits):
Always pay on-time.
Don’t take on more debt than you can repay.
Pay more than just the minimum payment amount on your credit cards.
Limit the number of open credit cards you have.
If you have debt, pay off high interest.
Repaying your student loan is a great way to build good credit. Even though many student loans are deferred until after you graduate, it's a good idea to plan ahead.
Tips for successfully repaying student loans:
Keep your student loan documents together in a safe place so that you'll be able to find them when you need them. This includes promissory notes, cancelled checks, notices of disbursement, letters, and other communications about your loan(s).
Students: Set aside a little money each week to make sure that you will have enough to be able to begin your payments when your grace period is over. Saving as little as $10 every week while you're in college will turn into $2,000 when you graduate! And if you find a great job immediately, you'll have a ready-made emergency fund.
Paying back your student loans on time is important! You can use student loan debt to your advantage by creating a good credit history. When you're ready to borrow in the future, other banks and lenders will see that you are a good risk for a loan.
Whenever possible, use online banking or ACH automatic debits to ensure that payments are made on time.
Make sure that you keep your lender informed about changes - your address, your legal name, school enrollment, transfers to a different school, graduation.
Read your student loan promissory note and Truth-In-Lending disclosure statement. They may not read like bestsellers, but you'll be ahead of the game if you know the terms of your loan. If you need help understanding some of the information on these documents, please contact us for assistance.
Do everything you can to avoid default on your student loans. It can be frightening and upsetting to have financial difficulties that make it difficult to meet your loan payments. If you think you can’t make a loan payment, talk with your lender as soon as possible about your options. Default can lead to any of the following:
Your student loans can be turned over to collection agencies and you can be sued for the entire loan amount.
You'll still owe the full amount borrowed, and you can even be charged with collection and court costs.
Your wages can be garnished. This means that a portion of your paycheck will be automatically diverted toward loan repayment.
You will cause damage to your credit rating and have difficulty borrowing money in the future for things like mortgages, car loans, and graduate education loans.
You may be unable to renew professional licenses.
You'll be ineligible for federal financial aid (for yourself or your kids someday), deferments, and federal interest benefits.