Smart Borrower Center
Tools to help you borrow better
Going into debt while you’re in college is frighteningly easy. With the demands of your classes and a new social life, you might find that swiping that credit card is the easiest way to get the things you want and need. Unfortunately, that habit can cause you to graduate into a mountain of debt and make achieving your future financial goals especially difficult. Rather than letting your credit card bills pile up, follow these tips for minimizing your debt while you are in college.
Cut the cards
If it is too tempting to charge that midnight slice of pizza to your credit card, it might be time to slice your card instead. Most college students don’t have a lot of dough, so it’s critical to create a budget that you can manage. Take a close look at your expenses and your income and determine which expenses are absolutely necessary, as well as how you’re wasting money. If your credit card purchases exceed your monthly income, you could be on the fast track to graduating into debt. You might want to cut your card (or at least hide it) so you can resist the temptation of spending money you don’t have. You may have to undergo a change in your lifestyle, but avoiding debt while in college can help you start your career on the right foot.
Pay more than the minimum
Did you know that if you rack up enough debt, just making the minimum payment may not even cover the interest on what you owe? Paying the minimum payment keeps you in good standing with your creditors, but it also means that paying off your debt could take a considerable amount of time – and cost you a lot of money in interest. Your best plan of attack is to curb your spending and pay off as much of your credit card balance as you can each month.
Start paying interest on your loans
If you took out unsubsidized student loans to help you pay for your college education, you have some options for minimizing your debt. When you take out an unsubsidized student loan, or a loan of any kind, you will be charged interest, which is a portion of the principal of the loan. You can choose to let the interest accrue, which means it is added to the principal that you owe. Or, you can choose to pay the interest while you are still in school. If you can comfortably afford to pay the interest on your student loans while you are in school, you can help minimize the amount you will owe when you are done with your degree. (Note that subsidized loans do not begin accruing interest until after you graduate as long as you are still enrolled in college above half-time status.)
Published on December 31, 2007