Budgeting 101:
Your Money Guide For Getting Through School
- Shop around for the best credit card interest rate. Consider using one card for balances that you'll pay in full and another card with a low interest rate for times when you need to carry a balance. A list of student credit cards is available at www.cardtrak.com.
- Don't pay interest on items you don't really need, or for things that will be gone by the time you get your bill. Otherwise, it's like buying that item marked up instead of marked down!
- Read your credit card agreements and the correspondence you get from issuers. There may be important information in them. For example, credit card issuers can generally change your interest rate with only 15 days written notice – even on a card with a fixed rate.
- Always mail your payments for your credit cards at least 5 business days before the due date. Most credit card companies have steep late payment penalties if your payment doesn't arrive on time. Also, your interest rate on new purchases as well as any current balance may be raised to a very high rate if you are late.
- If you pay your debts late, a late payment will likely to be reported to the major credit bureaus and will stay on your credit report for seven years. Your other credit card issuers may raise your interest rates if they see you are falling behind on other accounts.
- Call your issuers if you can't make a monthly payment on time. Ask them about alternative payment arrangements without damaging your credit or raising your interest rate.
- Notify your credit card issuer 30 days before you move, and don't assume that just because you didn't get a bill you don't have to pay it. If a bill doesn't arrive, call your card issuer or lender immediately.
- Try to pay off your total balance each month. Just paying the minimum is a trap: If you pay off a $1000 debt on a card with an 18% interest rate, it will take you more than 12 years to repay.
- Aim to keep your debt payments at less than 10% of your income after taxes. If you take home $750 a month, spend no more than $75 a month on credit.
- Calculate the cost of your expected student loan payments before you borrow and compare them to the salary you realistically expect to earn when you graduate. Generally, your payments shouldn't exceed 8% of your expected income. Any credit card payments should be included in that 8%.
- Graduate school can mean significantly more student loan debt if you must borrow to help pay for it. Consider looking for a job with tuition benefits and attending graduate school while you work.
- You may be able to get part of your student loans forgiven or cancelled if you perform certain types of work such as teaching or healthcare in low-income areas, some forms of military service, or if you serve in the Peace Corps. If you'll have a lot of student loan debt, you may want to explore these options before you graduate. Visit the Department of Education's website at www.ed.gov for information on student loan cancellation and forgiveness.
- If you anticipate having trouble paying back your student loans, look into options for flexible repayment plans, or postponing your payments. If you fall behind, you'll have fewer options available to you, so be proactive. Contact the Department of Education's Ombudsman's Office for more help at www.sfahelp.ed.gov. While you may be anxious to graduate as soon as possible, working full or part-time and attending school part-time may allow you to get valuable work experience while keeping loan balances at a more manageable level.
