Graduate College with Less Debt

First, I will say that I am no longer in college, but as an engineering major who transferred schools, I was there for a longer than most (mumbles something about 5 and a half years). However, there are little things I have learned about paying off student loans that I think every college student would benefit from knowing.

1. Before you even get to college, take the time to find scholarships and apply for them. The more scholarships you have, the less debt you have to take on for your schooling. Many students know about the scholarships available for merit and sports, but there are also scholarships that have to do with your background. Learn about your high school and college scholarships that are available and search scholarship databases. Even a $500 scholarship is worth applying for because that is $500 that isn’t coming out of your pocket.

2. Learn how student loans work. There are several types of student loans including different kinds of both federal and private loans. It is extremely important to learn the advantages and disadvantages to any kind before you choose what kind you are using. Many students prefer the federal loans because they carry less interest, but make sure you know the difference between subsidized and unsubsidized, because they can affect how much you pay later.

3. Get a credit card at the beginning of freshman year, if possible. I know several people are probably yelling at me from behind their computer screens right now, but I stand behind this one. There are rules however. With your card, only buy your school books and other school supplies and ALWAYS pay your card on time. When I say school supplies, I mean the supplies you use that are directly for academics-no that snack for your all-nighter doesn’t count. Just having a history of paying off your credit card on time could lower your interest rates on the loans you take out for the rest of your college career saving you tons of money down the road.

4. Only take out as much money as you need. Student loans are NOT free money. You will pay them plus more starting 6 months out of school. Make a budget to help you figure out what you need and stick to it. If you need help making a budget, please see my previous post on the subject.

5. Get a job. There are several opportunities on or around campus that can help you pick up a little extra cash to help subsidize your living expenses. Check to see if your campus has a job board. Even if you can’t keep up with your studies, friends, and a steady job, pick up a day job here and there. One semester, I picked up about $1000 just by bartending on the football game days. I still got to watch the game on the screens around the restaurant, but instead of spending money on tickets, I was making money. If you can put a few hours every week into a job, stick with it. I kept one of my student jobs for 3 years and I definitely think it helped me when I got out into the job market.

6. Don’t blow the money you make!! Barhopping might be fun, but doing it every weekend will definitely cost you later. If you want to hang out with friends, it is also fun to hang out at someone’s apartment and everyone brings a drink to share (only if you and your friends are all of legal drinking age of course). Think of activities that don’t cost that much, such as borrowing a movie from the library or playing ultimate frisbee. Everyone still has fun and doesn’t think about the fact that they aren’t spending money.

7. Pay off any accruing interest every month. The secret to student loan debt (or any debt for that matter) is that it snowballs. Say you have $1000 in debt with a 5% interest rate per year that accrues every month. The first month the interest accrues you now have $1004.16 that you owe, the next $1008.35, the next $1012.55, etc. By month 48, you are accruing more than $5 a month and your little $1000 loan is now over $1200. You now have to pay about $220 in interest instead of the $200 you would have paid. Remember that student loans are usually more like $5000 and up and the interest on most loans accrue even when you are in school. If you were to pay the interest every month, you now owe the same amount that you did when you took the loan out without the interest snowballing on you. For my husband, that meant more than $8,000 in interest to pay by the end of college and he graduated early. If he had paid it off each month, it would have been more like $3000 and it would be money already paid rather than still needing to be paid. Even if you can’t pay all of the interest while you are in college, every little bit helps.

8. Avoid the luxury apartments. It is easy to keep your debt down when your spending is down. One really easy way to do this is by paying attention to where you decide to live. You don’t need to live in the luxury apartments with granite countertops and the balconies that overlook the entire city and cost you $1500 a month. (Yes, some people do that.) You probably won’t spend that much time in the apartment anyway. Choose an apartment or house that keeps costs low that might not be as nice. On many campuses it can also be advantageous to not sign a lease until mid summer as the landlords are getting desperate to fill their empty apartments. Also, feel free to ask the landlord if they would be willing to negotiate price. My roommates and I got $50 knocked off our rent per month just by asking when we were touring the place.

9. Be smart about food. In college, you don’t really have much time to cook, but that doesn’t mean that you should go for a bunch of junk food. Pick up snacks with protein that will keep you full for longer, meaning you will actually eat less. Also, make a list before you shop and stick to it. If your friends like to have pizza night every Friday (or maybe that’s just my college friends), suggest making pizzas. Even frozen pizzas cost less and don’t take that much time. The truth is you probably aren’t the only person in your group of friends that is trying to spend less.

10. Keep an eye on your debt. Even just checking on it once a month can inspire you to save more money and pay more early. The more you pay before it comes due, the less you have to pay overall. Checking on the debt can also help you catch any errors that may occur. It is hard to fix 3 year old errors and checking on your debt on a regular basis can help the problems from escalating. I’ve known some people who had interest start accruing before they even finalized the loan! But it can be a quick fix if caught early.


About Danielle Beranek

Life can get away from you when being young, married, and still fairly fresh out of college. Taking on a pet, student loans, going back to school, and soon a new house is enough to leave ones head spinning. For me, life is crazy, but only on the outside.
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