Colleges graduates are drowning in debt. The Federal Reserve recently released data that shows the amount of outstanding student loan debt has now passed the amount of outstanding credit card debt – $829.785 billion versus $826.5 billion.
Consolidated Credit advises consumers how to budget and use credit wisely, but with recent statistics proving that student loan debt is becoming an epidemic for millions of young college graduates. Our financial experts are focusing on this pressing issue and providing young consumers with tips to avoiding getting deep into student debt.
The higher education platform in the U.S. is comprised of a wide range of institutions with various and vast programs. Students and parents typically choose colleges based on fluffy rankings via top 100 lists of best colleges and universities. But while there may be merit to those rankings, they don’t necessarily factor in cost. Parents and student should be more concerned about total cost and scrutinize the price tag of the college education
Helpful tips for getting through college with less student debt
- Graduate on time: Not many students graduate on time due to class schedule complications, working full-time in conjunction with school, or having to retake a class, many students end-up graduating in four and a half years to as many as six years. Staying in college longer than the estimated equates to needing more money for room and board, books and other living expenses. Students should take classes throughout the summer to have a better chance of graduating on time and with less student debt.
- Get a part-time job: Students should get a part-time job on campus or at a company that is willing to work with their school schedule. This will allow the student to earn extra money for additional living costs and school events without significantly increasing their student debt load. Although small loans of $5,000 here, and $3,000 there, don’t seem like much, they add up quickly. Add interest on unsubsidized loans, and those small $5,000 loans can turn into a whopping $10,000 in no time.
- Use a debit card to monitor spending: Monitor and analyze spending on a monthly basis. With free online banking, students can see where they are spending, which allows them to create a realistic budget for their lifestyle.
- Be realistic about money: If the student’s room, board, and college credit hours only cost $8,000 a semester, don’t take out a $20,000 loan. Thinking rationally and responsibly is an important ingredient to not having a future full of debt. Students need to remind themselves that they will have to pay back the money WITH interest.
- Find grants and scholarships: Students should look for grants because it is money that they DON’T have to pay back. Grants and scholarships are based on various factors including what field study, GPA, race, gender, or type of degree that is being sought. Thanks to the Internet they are much easier to find and they can reduce the total amount of student loans that are needed to survive college. Parents and students should check the Student Aid Wizard from the US Federal Government Department of Education.
- Max out federal loans first: These loans offer low fixed interest rates and better repayment options. Try to avoid private loans, which usually charge much higher interest rates. Private loans typically charge 18 to 25 percent in interest, where as federal student loans offer interest rates not exceeding 8 percent.
Not taking debt seriously, whether its credit card debt or student loan debt, can impair a student’s financial life long after they have walked across the graduation stage. Spend wisely and live within your means and only take out student loans for college credit hours, books, room and board to save financial stress in the future.