3 Common College Money Mistakes
While we often discuss the high cost of college, and how to prepare for it, another important topic to discuss is what students can do to manage money wisely while they’re in college.
As this USA Today article notes, “Investing in a college degree should carry the often-cited disclosure: ‘past performance is not indicative of future returns.'”
While choosing the right major and the right school for them is a very important starting place, it is just that – a starting place. The financial challenges of college can often set a student back substantially when starting his or her adult life – if not properly handled.
Here are costly 3 mistakes that college students should take care to avoid:
1. Not Applying for Financial Aid
A surprisingly high percentage of students planning to attend college are not very savvy about sources of financial aid. Not only should you educate yourself about all of the aid opportunities that may be available to you, but you should also make sure you are filling out the financial aid forms correctly – and every year!
Even if you don’t think you will receive financial aid, by not filing the FAFSA, you could potentially be missing out on opportunities you are unaware of. Some schools award some types of merit-based aid simply for filling out the forms properly. If you don’t fill them out, you won’t get the aid.
Remember that you need to file the FAFSA soon after January 1 for each year that you are going to be attending college. Filing correctly and on time helps maximize your financial aid opportunities. If you have questions on the FAFSA or other aid forms, be sure to consult with a qualified college planning advisor.
2. Not Managing Debt Properly
College is often a young adult’s first opportunity to really start incurring personal debt. Students are often inundated with credit card offers, and can often find themselves in hot water very quickly if they are not financially savvy and fully aware of how credit cards work.
And student loans can sometimes be even worse! Unlike credit cards and some other types of debt, student loans are very hard to wriggle out of – even through bankruptcy. This means that student loan debt can follow you for many, many years. In fact, the number of retirees carrying student loan debt is rapidly increasing! Large amounts of student loan debt can really create a burden on college graduates seeking to buy a home, have a family, and do other adult things.
Learning to control spending and manage debt wisely in college can help you build a good financial foundation that will serve you well later in life.
3. Taking Too Long to Graduate
While college may be fun (some say the most fun years of your life), staying in college for longer than necessary can be a costly proposition – and it can happen very easily without proper planning.
These days, it takes a lot of careful planning to graduate in 4 years (the national average is 5.2), and every year that you spend in school is another year of tuition (and other) bills to pay – often at higher and higher costs, as college tuition continues to increase.
It’s not uncommon to need more than 4 years to obtain a college degree, so students should be prepared financially to handle an additional year or so of college if necessary.
The bottom line: Plan ahead, and save as much as you can ahead of time, then make sure to take advantage of all financial aid available to you. Students should research options like work-study, grants, scholarships, and loans, and be prepared to take on part-time jobs if needed. Remember that these can actually provide great experience, and sometimes help you get a foot in the door to a career upon graduation.
We offer a full range of college planning services to help put your student and your family on the best pathway to success – throughout college and beyond. If you need assistance with your college plan, please contact us for a free evaluation with a college planning specialist.