Many students accumulate debt before they realize what's happening, and it may be difficult to start digging your way out of debt once you graduate. According to a student-aid study cited by the American Council on Education website, debt levels start in the $5,000 range for community college students and can reach more than $70,000 for those pursuing professional degrees. This can lead to financial problems that follow students for years--even decades--after graduation.
Tuition and Fees
College tuition and fees are large expenses for students. A full-time college student might spend thousands of dollars each term for credit hours, campus parking and books. Many times, these students do not realize they could apply for federal Pell grants to cover many of these expenditures. Pell grant recipients must meet certain income requirements, but scholarships are often available for students not eligible for those grants. Find out more through your school website or counseling office or on websites such as Studentscholarships.org. Avoid parking fees by carpooling with other students when possible and purchasing books online, in an off-campus, discount bookstore or from other students to save money. And always check with your instructor before buying books to make sure you actually need them for class. Supplies such as backpacks, pencils and notebooks are usually available at a discounted rate in dollar or outlet stores.
Credit Card Debt
Students are frequently targets of credit card companies and can quickly accumulate debt. Cards that carry high or variable interest rates and hidden charges can cost you a lot quickly and can leave you struggling to make even the interest payments on the cards. Because of the recently enacted Credit Card Protection Act, students under 21 must get a co-signer and credit card companies must give you the option of stopping payment on charges to avoid over-limit fees. They must also tell you before hiking interest rates. Students should read credit card terms carefully before accepting any offer, and make sure to pay their balance monthly to avoid accumulating debt.
Living expenses can eat up a lot of students' money, particularly those who are able to work only part-time or not at all. Consider living with your parents to save money if you attend a local college. If not, you definitely need roommates to help cover expenses if you live off campus. You might find that a two- to three-bedroom apartment or dorm room is much less expensive than a one-bedroom if you split the bills evenly with one or more roommates. Consider whether you need extras such as a home phone, cable or extra Internet services. Try using your cell phone as your main phone after rate comparison shopping, and if you must have Internet and cable service, find the lowest-priced deals. Turn your air conditioner, heater and lights off when leaving the home to save money on electricity. Food and other necessities can often be bought at dollar or discount stores to save money.
Many students take on a great deal of debt in the form of student loans. All too often, students take out loans from private companies with high interest rates. According to an article by "The New York Times," variable interest rate loans can reach 20 percent. This can lead to long-term debt that is often difficult to cope with for recent college graduates. Because of the Fiscal Responsibility Act, students can now take out government loans at rates ranging from 4 percent to 9 percent. At the end of the loan period, repayments required will not exceed 10 percent of your discretionary income, and if the loan still exists after 20 years, the balance is forgiven.
Many students who are out on their own for the first time may get caught up in a cycle of overspending that comes with eating out, buying new clothes or partying. This lifestyle can become expensive very quickly and can increase overall debt. To avoid unnecessary expenses, follow a budget in which you pay your necessary expenses first and leave yourself a specific amount of your income for entertainment. Then stick to that budget. Try cost-saving ideas such as watching movies at home, cooking your own meals regularly and buying clothes from discount stores.
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