Many new college students look at the world with wide open eyes of opportunity and promise, only to find themselves financially crippled after graduation. From the moment a student steps on campus, money is being spent, whether it is being paid for by parents, part-time work, grants or loans. A first-year student is likely to forget that there is money involved in their education – but knowing how to properly manage their personal finances and what mistakes to avoid from the start can help control the total cost of their education.
Mistake #1: Paying for Everything with Loans
One of the absolute biggest mistakes that parents and students often make is charging all college expenses through loans. Private loans from a for-profit lender can be one of the riskiest ways to finance your education – with rates soaring much higher than federal student loan programs.
Instead, seek out other ways to finance your child’s education. Encourage your child to always be on the lookout for “free money” that can significantly lessen the burden of student loan payments after graduation. Grants, tuition discounts, or even scholarships can help cover the cost of your child’s education at no added expense. Make sure to know about all available grants your child is eligible for – including state, need-based, merit, professional association-based and minority programs that can provide much needed financial support for almost any student.
Mistake #2: Poor Preparation from the Start
College students are quickly thrust into new financial territory, many of them living on their own and supporting themselves for the first time in their lives. Unfortunately, most students are ill-prepared for the challenge.
It's important to remember that college is not a transitional period between childhood and adulthood. Develop a financial strategy before your son or daughter ever sets foot on campus. Sit down and carefully assess your child’s expenses, and provide them with a stronger grasp on what real world expenses look like. Use online tools to create a monthly budgeting system for your son or daughter, setting clear financial and savings goals along the way. Developing this sense of financial discipline early on will help your student become a smart spender while minimizing their post-graduation debt.
Mistake #3: Not Carefully Managing Your First Credit Card
Student loans create enough debt on their own, but many students often add credit card debt on top of their existing loan repayments. Whether you signed your child up for their credit card, or they applied during freshman orientation week on campus – mismanaging a credit card can leave your child in a lot of trouble.
Getting a credit card can be a great idea, but only if your child knows the dangers of debt that linger. Teach your child how to responsibly use their starter credit card by keeping balances low and paying everything off in full and on time. Starting your son or daughter on the right path with responsible credit card use can help them establish a stable credit history to build off of later on.