College Financing Tips: Ways to Manage Your Finances as a Student
Engaging in healthy financial practices is essential at any point in life, especially in volatile economic climates. Having financial stability equals peace of mind and having more freedom to live your life to the fullest. However, when thinking about college, or any form of higher education, the term "penny-pinching" comes to mind as most students have to practice frugality during their collegiate years. There's a reason the "ramen noodle diet" has gained popularity within university jargon - college is expensive, and quite frankly, ramen noodles are not. Whether you're starting your undergraduate degree or earning your PhD, there are multiple steps you can take to stay ahead of your finances during school.
Please note that these recommendations are purely suggestive. Every financial situation is different, and it's critical to consider which options work best for your situation.
Develop a Plan
Formulating a financial plan is one of the first steps you should take when beginning your educational journey. You wouldn't buy a trailer and embark on a 6-month road trip without a plan first, would you? How would you know what you’d need and where to go? It would be much easier to plan your journey, map out where you want to go, how you're going to get there, and what you're going to do once you reach your destination. This helps prevent hiccups and stress in the long run, ultimately allowing you to have a more enjoyable experience.
The same should go for your academic plans. Take time to understand the exact implications of earning your degree fully, decide what your educational goals are, and what school you wish to attend, and from there, you can formulate your financial plan. Factor in all external influences, such as housing, transportation, food, and the general cost of living. It can be shocking how many "little" things can add up over time, especially when you're in school.
So, to reiterate, develop a financial plan before diving headfirst into a budget that isn’t feasible. It will dramatically help you in the long run, reducing your levels of stress and allowing you to focus on what matters most - learning!
Pay Yourself First: Start Saving
Committing to "paying yourself first" and building a hefty savings account is crucial regardless if you’re an aspiring student or well off into your career with your higher degree already in hand. If you plan to attend school, start to sock away some extra pennies when you can, and you’ll find over time, you’ll be better situated to finance your degree when you’re ready. The younger you start, the better off you will be. Some financial experts recommend putting your saved money into a high-interest savings account. Whether that be a money market or credit union account, finding a way to earn more money for your money doesn't hurt!
Saving money also intends to not "nickel and dime" yourself - meaning spending unnecessary bits of money here and there adds up over time. Did you know multimillionaire Kevin O'Leary won't spend $2.50 on a coffee? Why? Because he doesn't want to waste his funds on unnecessary expenses! Famed Shark Tank investor Mr. Wonderful instead saves that money and invests it, allowing him to make more. While you don't have to do something as disciplined as this, it's essential to realize the narrative behind this practice - avoiding spending on the unnecessary to save towards something with a higher return on investment, like a college degree!
Find Ways to Subsidize Costs
Subsidizing your costs to save money and have greater flexibility is highly favorable, especially in college. Being in school is also an opportunity to take advantage of some of the perks available exclusively to students, such as student discounts or free networking events. It is also a time to get thrifty with your money–doing things such as working a part-time job or side-hustle, to living with roommates or parents, there are various ways you can cut down on unnecessary expenses.
Use Credit Cards Wisely
Credit cards can be a beneficial financial tool to utilize for building an impressive economic reputation. If used wisely, credit cards will help generate a high credit score, qualify you for exclusive deals and loans with low-interest rates, and provide a financial history that lenders can have confidence in. Typically, there are options to enroll in specialized credit cards created solely for students. These cards may have lower introductory interest rates, better partnerships with businesses, and may offer specific cash back incentives for using a credit card for school-related expenses.
Playing devil's advocate, credit cards can also become a massive burden if you aren't careful. Interest rates on credit cards are astronomical and can take borrowers years to pay off the accruing interest on top of their debt. When using a credit card, make sure to use it only for necessary expenses, keep your balance low, and pay it off every month. Do not treat your credit card as free money, as it is the complete opposite.
Regularly Apply for Scholarships
Did you know that every year, an average of more than 1.7 million private scholarships and fellowships are awarded, with a total value of more than $7.4 billion? That's a severe amount of cash, enough for you to attend school 1,000 times over!
In today's academic climate, the costs of attending college are always on the rise. However, the promising news is that there are many creative ways to fund your academic journey, including various scholarship opportunities. When applying for scholarships, consider the multiple avenues you can take, including the different types of awards that are available specifically to you, work requirements involved, potential restrictions, and the total amount you could earn. To your surprise, there are numerous scholarships available for very niche categories, like the "Doodle 4 Google" scholarship or the "Create a Greeting Card" scholarship contest. While these methods may be a little unorthodox, that's even more reason to apply!
Another aspect to consider is the volume of scholarships you can apply for. Most students are not limited to the amount of scholarship money they can receive, so why not earn as much as possible? While some scholarships may not be "full-ride," every little bit counts. And a little here and there can eventually amass to a large chunk of money. As said in the Tanzanian Proverb, "Little by little, a little becomes a lot."
Understand Student Loan Options
If student loans are an option you have to consider, make sure you thoroughly understand the types of financial aid before signing.
One of the most important aspects to consider with either student loan option is interest rates.
For those who might not be familiar, interest rates are classified as "the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding." If you take out a five-year loan to buy a $30,000 car at a fixed interest rate of 1.9%, you will pay roughly $1,500 in interest over the five years, on top of the initial borrowed amount of $30,000. In the end, you spent approximately $31,500 on your car after all is said and done. Most would consider that great, as it's a very minimal amount of interest paid for the loan's entirety. The same goes for student loans. There are two prominent types of student loans available for school - federal and private.
Most financial experts recommend starting with federal student loans, as they are a more economical option. Federal loans are given to students by the government and have specific stipulations in comparison to private loans. Federal student loans stay at a fixed - typically low - interest rate. This means you will pay less interest over the entirety of the loan, allowing you to spend less money on loans and have more money to save and invest. Federal loans don't require payment until you're done with school, leave, or change your status to "less than full-time." There are potential options for government "subsidies," - which means you can receive additional help to pay your loans if you meet specific criteria. Loan forgiveness, in which you may be eligible to have some portion of your loans forgiven if you work in public service, is a potential option solely available to federal student loan holders. Federal loans also offer more flexible repayment plan options tied to your income and other factors.
Private organizations give private loans with conditions that are set by the lender. This includes banks, credit unions, and state-based or state-affiliated organizations. Private student loans are generally more expensive than federal student loans. Individuals may take out private student loans because they have a good standing relationship with the creditor, allowing them to earn special privileges such as lower interest rates or more generous loan terms. Also, private loans can enable students to take out a more significant amount of money if needed. But remember - just because you can take out more doesn't mean you should. Make sure to be realistic with your loan amount needs before biting off more than you can chew. It's also important to note that not all private loans will work in your favor. Some may require payment during your time in school, can have much higher interest rates, have less flexible repayment options, and do not typically offer loan forgiveness.
Whichever loan you choose, make sure to understand all the ramifications beforehand.
Have a Financial Plan Post Graduation
So, you've finally done it. You have graduated! Now what? Well, for starters, the best thing to do is to begin your career journey. Hopefully, you are working in your field of study, making a good salary, and have the means to start your post-graduate life. Whether you have student loans or not, it's vital to have a financial plan, allowing you to be set now and in the future. Those graduating with student debt, prioritize paying that down first before buying that shiny new Lexus or cashing out on a lavish trip to the Bahamas.
By paying off that debt - interest included - you'll have more money to save and invest, allowing you greater financial freedom. If you do not have loans, take advantage of that and start putting those "would be" loan payments into savings, retirement, or investment accounts. Over time, those accounts will accrue a lump sum of cash, allowing those assets to be built into more assets. Whatever your post-graduate journey, make sure to have a plan, so you can start enjoying the benefits of financial freedom!
Financial Assistance Offered at Pepperdine Graziadio
At Pepperdine Graziadio, helping our students is at the forefront of all that we do. We offer various types of financial aid dedicated to helping our students reach their career aspirations and personal goals. See more about funding your academic journey with Pepperdine Graziadio.