Here in New England the nights are getting cooler and U-Haul trucks are clogging the streets, which can only mean one thing: college is starting soon. For freshmen the upcoming years will bring academic rigors, good times, and critical financial decisions. Here’s what every student should know about personal finance in college.
The credit will flow.
Don’t be surprised if credit card companies greet you at orientation, call you, and stuff your mailbox. Be smart. It’s not a bad idea to build your credit during your college years. But do it with one credit card by making only small purchases and paying off the balance each month.
You will be tempted.
With new freedom, friends, and free time, there will be more things you might want to buy. And those credit cards will make it easy to deck out your dorm, cruise to Cancun, or eat like a king. Be smart and resist or graduate in oodles of debt and pay thousands in interest.
You will have richer friends and poorer friends.
In nearly every college class there are students on full scholarships and students whose parents will someday name a building. Be friends with both of them, but do not become them. Spend within your means, not to keep up with the richest kids on campus.
Loans are not the only option.
If your parents applied for financial aid on your behalf, you are paying at least some of your tuition with student loans in your name, not your parents’. Your college will tell you this and make you sign a promissory note, but it will seem like a blip on the radar screen of orientation. Look at how much you’re borrowing and think about the 10 years you will be repaying that loan. Consider whether you could work a few extra hours to reduce the amount you borrow.
There will be expenses.
Just because your food and housing are taken care of doesn’t mean you won’t have bills. Cell phones and car insurance are common. And that car can break, and at the beginning of every semester there are books to buy; books so expensive you will wonder if they’re made from gold. Plan accordingly. Have a savings account. And if you must borrow for books, inquire about using federal loans; not credit cards. That alone may save a couple thousand dollars.
There is no pot of gold at graduation.
After four years of college the thought of a full-time job can seem like hitting the jackpot. But dreaming of what your first full-time job might pay is poison. What may be a lot of cash while you’re in college might barely get you by in the real world. Don’t bank on having more than enough when you graduate. Never assume you’ll be able to quickly repay a debt after school. You just never know how the wind will blow.
The value of an education isn’t what you can earn with it.
Finally, don’t go to college just to make more money. Sure, one of the reasons we pursue education is the promise of a higher quality of life. But the value of an education is so much greater than the salary it can get you. Enjoy learning. Take a class or two just because you want to. Learn to appreciate something new. And think about how you might use what you learn to make the world a better place.