Borrowing money for college is a serious financial obligation. In addition to principal borrowed, interest is generally charged for use of funds. It’s important to remember when you borrow money that it must eventually be repaid. When signing a loan promissory note, you make a legal and ethical agreement. Legally, you will be required to sign the note promising to repay the loan. Ethically, you are responsible to future borrowers, since collections from old loans are a major funding source for new loans. Consider this commitment carefully when taking out a loan, and consider how much you reasonably can repay.
It’s important to be cautious and sensible when making decisions about student loans. Be realistic about how much money you’ll be making after graduation, as well as the kind of monthly payments that you’ll be able to afford—recent graduates rarely earn the maximum salary in their chosen field. To aid in making your budget, the U.S. Department of Labor has a handy http://www.bls.gov/bls/blswage.htmwebsite which catalogs entry-level salary averages for the entire country, organized by field.
For many students, financial aid and/or student loans are their first real-world experience with money management. That lack of experience can make students especially vulnerable to credit fraud and identity theft. Today, as more and more commerce is done automatically and electronically, it’s more important than ever to safeguard both your identity and your credit.
SFA presents several workshops in the spring for students highlighting safe credit practices and how best to avoid identity theft. Watch our Web site for details.
Students need to be especially vigilant in their electronic dealings. Why? 78% of undergraduates have at least one credit card and carry an average balance of $2,478; 31% of identity-theft victims fall into the 18-29 age group.
Be extra cautious when providing information to companies over the phone. If you did not initiate the call, never divulge identity-related information to anyone.
If you are a victim of fraud or identity theft,
- Immediately close all accounts including bank accounts
- Contact any of the three main credit agencies to place a fraud alert on your credit report
- Contact your local drivers license agency to cancel and get a new license
- File a police report
Budgeting Your Money
A student’s financial aid disbursements may be his/her first experience with budgeting. Since most financial aid disburses at the beginning of the semester, it’s important to develop strategies to make your money last until the next semester’s disbursement. A budget and good spending habits are key to financial well-being and stability, especially for a student on a fixed budget. Some tips:
Develop a Budget
Calculate your estimated monthly income, taking into account: savings, earnings from a job, financial aid, etc. Then calculate your estimated monthly expenses, including: rent, meals, Internet access, cell phone, utilities, clothes, books, etc. If your total expenses exceed your total income, you’ve got some budget cuts to make.
Gainesville has a plethora of stores that specialize in used stuff—used bikes, used books, and used clothing are all cheap and in good supply. Buying used isn’t just inexpensive, it’s a good way to reduce waste.
Watch Your Debt Load
Students are having to rely more and more on student loans to help pay for college. Consider carefully whether or not to borrow the full amount for which you are elegible. Consider your debt load carefully—for most students, your student loan is probably the beginning of your credit history. Don’t borrow more than you can comfortably repay.
- Limit total debt amount to the salary you expect to make in your first year after graduation.
- Work backwards—using a budget, calculate monthly payments you’ll be able to afford after graduation. Borrow an amount that will yield monthly payments of around 8-10% of your expected monthly income.