5 Ways for Students to be Debt Smart
With 60 percent of students borrowing, Bills.com suggests 5 ways to be debt-smart
SAN MATEO, Calif., Aug. 30, 2006 - Fall is around the corner, school bells are ringing, and families everywhere are reeling from paying tuition bills -- followed, for college students, by the one-two punch of textbook purchases that average nearly $900 per year.
For the most recent school year, private colleges cost families an average of $29,026, with public universities still pricey at $12,127 per year. Some 60 percent of students receive some form of assistance with those costs -- at a minimum, most students qualify for one or more tax breaks on the money they spend on tuition -- but most students still accumulate debt for school bills.
"Typically, we urge people to be very cautious of accumulating a debt load," said Andrew Housser, co-CEO of Bills.com. "To further your education, however, it's sometimes necessary to borrow - and educational debt is arguably a sound investment, because it can increase your earning potential for the rest of your life. But there are ways to borrow smartly."
Data from the U.S. Census Bureau backs up Housser's position: In 2005, workers with a bachelor's degree earned an average of $51,206 a year, workers with an advanced degree averaged $74,602, and those with a high school diploma earned $27,915. Workers without a high school diploma made only $18,734.
With that "green light" to borrow, it remains important to do your best to keep your debt at a minimum. You can keep loans in check by following several guidelines:
- Borrow the lowest amount you need. Some programs offer students as much as they can borrow to pay tuition, fees, books, living expenses … and maybe the lease payment on that new car. Take an honest look at your budget and remind yourself you'll only be a "starving student" for a short period of time. Don't pay for luxuries like satellite TV and sushi dinners with student loans. Borrowing for $100 in frivolity every month for four years could cost you an extra $50 a month in loan payments for 10 years after you graduate. That's money you could be using to pay for that post-graduation cable upgrade -- when you actually have free time.
- Get a good rate. Federal student loans have a set interest rate while you are in school and for the life of the loan. But many families must borrow additional money to make ends meet. Apply through several programs and compare rates to make sure you get the best value for your dollar. Review information about student loans and student loan consolidation at Bills.com.
- Gifts are better than loans. Look into all the options available for school funding. This can be a year-round activity. Scour the Internet and your personal connections for scholarships and grants -- many are available for categories based on extracurricular activities, ethnic or national background, parents' or grandparents' occupations or employers, interests, future plans, gender and many other qualities. Even a $200 grant can help with deposits and textbooks.
- Work is a four-year word. Get a job to pay your way. Even a few hours a week can help with food and textbook costs. Ideally, find a job that serves two purposes: bringing money in and giving you real-world experience that will help you meet the greater goal of boosting later earning power.
- Squeeze in fun. No matter how small your budget, one of the great features of most college campuses is the abundance of inexpensive activities. Always give yourself a "fun" budget, even if it's just a few dollars a week, so you can rent a movie, grab coffee with a friend or catch a sporting event. Otherwise, you risk burning out and losing your investment.
"When you keep your greater goal in mind, the scrimping and saving -- and accompanying loans -- will pay off," noted Housser. "Then the college years really will be 'the best time of your life,' at least until you surpass them with later achievements."
Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and save money by choosing the best-value products and services. Since 2002, Bills.com's partner company, Freedom Financial Network, has provided consumer debt resolution services, serving more than 10,000 customers nationwide and managing more than $250 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were recently named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.