Managing money as a college student is not an easy task. As you start your college journey, there are many activities to manage such as school work, extracurriculars, social life, etc. Most students quickly learn that it is essential to be cautious of the money you spend in order to continue with daily activities. Here we will tell you three easy steps to budget your money in order to get the full college experience and take off stress.
Gather your financial details
This is an important first step in order to understand how much money you will be spending. You can do this by talking with your parents, checking your bank account cash flow, and searching for scholarships and grants that your university offers. By gathering all of this information, it will allow you to see exactly how much money you will have to manage.
Predict and Plan your Expenses
This includes anticipating how much money you will be spending on rent, food, textbooks, clothing, transportation, and extra cash for fun. Having a clear understanding of what you have to and would like to spend your money on will help you form a direct plan. This will help you stay cautious of where your money will be spent while at school.
Track Your Spending
This is an important final step in budgeting your money as you will need to keep track of all your expenses. By doing this, you can see exactly where you spend your money in case you need to reevaluate your spending. This helps to see where you can cut back or have room to spend more.
Whether you are a student getting ready for college, a current college student, or a parent of one, you may be eligible for a federal student loan. Although your financial aid office will issue you student loans according to the documents you submit, you have the option to reject or consult with your advisor for another type. You may ask — why would I reject any student loans? Isn’t more the better? Different types of student loans come with different obligations on the repayment process that you may rather not accept.
Here are the two types of basic student loans:
Direct Subsidized Loan
The direct subsidized loan is given based on financial need — which the Department of Education defines as “The difference between the cost of attendance at your school and you expected family contribution.” In other words, the documents you issue to your school, like your family’s tax filings, are essential.
A key factor to this type of loan is that the federal government will pay for the interest accrued while the student is in college, and for the first six months after you leave.
Direct Unsubsidized Loan
The direct unsubsidized loan is not given based on financial need, but rather to undergraduate or graduate students. This amount is determined by your financial aid advisor based on any other loans you are borrowing and the school’s cost of attendance.
As attractive as this loan sounds, the direct unsubsidized loan will be charged a fixed interest rate from the moment it is issued, until it is the loan is completely paid off. In other words, if the loan is issued in your freshman year of a 4-year college education, the interest will begin to accrue from that moment, throughout all your college years and the entire lifetime of the loan.
However, as of date, the Biden administration has halted federal student loan payments and has kept the interest rate at 0% until September 30th, 2021.
Understanding the differences between the two basic student loans will help you plan out your future finances and capabilities more easily. Remember — you have the choice to reject them if you find that they won’t be appropriate for your situation. Let your college financial aid office know, and they will have to follow your choices.
For many college students, student loans are a major component in helping to afford college. Life after college can be especially confusing when having to manage both student loans and personal finances. For some, it is the first time they have to deal with things like budgeting and making student loan payments. Many schools also do not teach financial literacy, leading there to be several common misconceptions regarding student loans and credit score. So, how does student loan affect credit score?
Many believe that there may be a good or bad association between student loans and credit score, or that there is no relationship at all. But in reality, student loans can affect your credit score both negatively and positively.
How to avoid student loans from hurting your credit score
There are five components that make up your credit score: amounts owed, new credit, payment history, credit mix, and length of credit history. Student loans affect payment history, credit mix, and length of credit history.
Keeping up with monthly payments is key. Payment history makes up 35% of your credit score. While forgetfulness does occur, missing continuous payments will be detrimental to your payment history. Payments that are overdue should be taken care of immediately. The more overdue your payment is, the larger the consequence that you will face. You may end up going into default as a result. For federal student loans, this occurs after 270 days of not making the payment, and for private student loans this occurs after three months. Your credit score will drop when your lender reports the late payment to one or all of the three major credit bureaus.
Remember to borrow mindfully. Applying for new loans can hurt your credit score, especially if you have several loans, do not have a long credit history, or student loans are your only form of credit.
If you are forgetful, it may be helpful to schedule reminders on your calendar or set up autopay. If you cannot pay your student loans, try asking your lender to pause or lower your monthly student loan payments as soon as possible.
How credit can benefit your credit score
Conversely, making payments on time will improve your payment history, and therefore benefit your credit score. Presumably, if you have student loans, you will be repaying it within several years. The amount of time taken to repay your student loans affects your length of credit history. Having a history of making regular payments will present you as a reliable borrower to lenders. Student loans also help to diversify your credit mix, increasing your credit score.
If you have student loans, it is important to stay informed about their effects on credit score. How student loans affect your credit score will depend on how you manage your student loans. Making sure to stay organized and on top of your payments will lead you to a better credit score. Having a good credit score is vital to your financial health. You will receive many benefits from a good credit score including low interest rates on credit cards and loans, a higher chance for loan approvals, and much more. If you would like to improve your credit score, consider applying to Tomo. No credit history required, no interests or fees, and your credit will never be pulled.
When I was 4 years old, I remember thinking, “I can’t wait to be an adult!” Then, when I entered my first year of college, I had to be an adult and I had no idea how. Adulting is hard, I get it. A big part of adulting is learning and growing from your mistakes, and a big mistake that most people make in college is not learning how to manage their money. Personal finance isn’t something they teach you in high school, so don’t feel bad about not knowing anything! Here are some things I wish I knew about finance in college, so that you don’t have to repeat my mistakes!
Don’t spend more than you can afford.
I was fortunate enough to have my parents pay for my expenses in high school. I didn’t see the money leave my bank account so it didn’t occur to me that I might have been spending a lot. When I started college, I started paying for my own expenses and it hit me how bad my spending habits were. I ended up spending without taking note of how much I was spending, because I was so used to just buying things without a care in the world. After I started noting my spending habits, I ended up saving a lot of money and only bought things I needed. Make sure you only buy things that you can afford and always take note of how much you spend so you don’t get any surprises at the end of the month!
Put some money into savings.
It’s tempting to spend all of your money because with more money you can buy more things! However, that only gives you temporary satisfaction. Putting your money into a savings account is an investment into your future. You never know if you might run into a tough financial situation in the future. If you start by saving five dollars a day, that can add up almost $2000 in a year! This can also help when paying off student debt in the future. When you put money into a savings account, you also earn interest! Consider looking at a high-yield savings account since it has a higher interest rate than a regular savings account.
Take out loans wisely.
Student loans may seem like free money since you don’t have to pay it back immediately. Some students might end up using this money for non-school related expenses. It’s important that you manage your loans wisely so that you don’t end up with a huge debt at the end of it all. Learn about the different types of loans your school offers. It’s typically recommended to take out subsidized loans first whenever possible before considering unsubsidized (private) loans. The government will pay for the interest on subsidized loans while you are still in school, but unsubsidized loans will start accruing interest the day you take it out. When it comes time to pay off your loans, make sure to start with the loan with the highest interest.
Turn your hobby into money.
You can make money out of doing just about anything! With the help of the internet, it’s become even more simple to sell your services. If you’re interested in photography, consider offering your services for graduation photos! For those into arts and crafts, you can sell your work using different platforms, like Instagram or Etsy. I even knew someone who was cutting hair in their apartment! Not only can you make money, but you can also add these experiences onto your resume or portfolio. Get creative and almost anything can earn you a stream of income.
Understand how credit works.
You hear it all the time, but everyone really does need credit. Having a good credit history will help when buying things like a car or a house. Your credit score basically tells the banks how trustworthy you are with money. Getting your first credit card to start building credit might not be easy. Credit card companies look at your credit before deciding if they can trust you with a credit card. Luckily, there are some great options for students. Students can become an authorized user of their parent’s credit cards. If students want their own card, they can consider a student card. Student credit cards consider the fact that you may not have a credit score and are geared towards college students. Another great option is TomoCredit. The Tomo card is great for college students and international students who don’t have a credit score. There are no interest fees and Tomo will never do a credit pull, which means it won’t lower your credit score in any way! It’s important to start early, because the longer your credit history, the better!
