The burden of studies, submissions, exams, and countless other activities during college is enough to keep you stressed out 24/7. Add the onus of student loans and you’ve got yourself a migraine.
Check out these seriously mind-boggling statistics about the current state of student debt:
- Roughly 44.7 million people carry a substantial amount of student debt.
- The average 2018 graduate left school with $29,800 in debt.
- The average student loan payment is between $200 and $299 per month.
What’s more, Americans owe more than $1.53 trillion in student loan debt, according to the latest data from the Federal Reserve, and that number shows no sign of decreasing anytime soon.
While there are many things you can do before entering college to avoid getting into massive student debt, there is a lot you can do during college to graduate with minimum debt on your shoulders. Here are 5 such ways to minimize your debt before you finish college.
1. Make a Budget and Stick to It
You must plan a budget to stay on top of your college finances. Having a solid sense of how much you’re spending each month (and on what) will greatly help you in avoiding reckless overspending and taking out more loans to cover unforeseen costs.
Moreover, creating and adhering to a personal budget while still in college also helps you master the basics of money management.
So, if you haven’t already mapped out a budget, it is about time you do it. And once you create one, commit to it religiously. Also, make sure to review it periodically to ascertain it matches your current needs to graduate with flying colours.
Consider using a free app like Wally or Mint to heavily simplify budgeting as a bustling student.
2. Apply for Financial Aid
Financial aid is an excellent option for families in need. Financial aid offers students with federal loans, but it also includes federal and state grants that students don’t have to pay back.
Of course, it’s best to apply for financial aid before you enrol in a university. But if you hadn’t, you can still do so during your academic year.
To qualify, you have to fill out a FAFSA (Free Application for Federal Student Aid) every year before the designated deadline. Once your application is processed, you’ll receive an EFC, which is an expected family contribution and this will define how much you will be conferred in grants if you qualify and meet specific requirements (such as attending school at least part-time).
Furthermore, a few weeks after you submit your FAFSA, you’ll receive a student aid report (SAR). Your SAR will notify you whether you qualify for a federal grant, such as the Pell Grant, or if you qualify for work-study and other federal aid programs. It does not tell you the exact amount of aid you qualify for, as that is determined by the school.
The FAFSA isn’t a one-time deal – you need to apply one for every academic year, revealing your income and financial status. File it early each year to have the highest chance of receiving the best financial aid package.
3. Work Part-Time on Weekends
Easier said than done, but if you can work a paid part-time job or internship while still in school, it can seriously help your student debt distress.
It’s been reported that about 70 to 80 percent of college students are active in the labour market while enrolled in college. While some students work part-time jobs during college, many take on a larger workload. About 40 percent of undergraduates work at least 30 hours a week.
“One of my big regrets was not working while in college,” laments James Finn, who spent the past few years paying off his debts before becoming a travel vlogger. “I graduated with $34,000 in student loans, and $8,000 of that was interest accumulated during those four years.”
A modest pay can easily cover your living expenses, or help pay off interests. Not to mention a job even somewhat relevant to your field of study will count as work experience and improve your prospects.
For instance, working weekends as a freelance writer while studying marketing or journalism is a great way to strengthen your portfolio while earning some allowance.
All that being said, successfully managing part-time work and college work (studies, projects, assignments, etc.) is going to be an uphill battle. If you’re not careful, you can end up spoiling your grades and do more harm than good to your resume. Plus, it can unwittingly serve as another source of stress, cause burnout, and restrict you from enjoying college life.
So, make sure you take up part-time work only in those semesters where you have spare time or you can pull extra hours without disturbing your health and studies.
4. Live a Minimalistic Lifestyle
In your university days, it is extremely tempting to celebrate and party every other weekend, shopping with friends and dining out in lavish restaurants. Sure, an occasional stress-buster is all well and good, but you don’t need anyone telling you the obvious – splurging regularly is a bad idea in every sense.
Fresh, delicious, and wholesome food doesn’t have to cost a pretty penny. Shopping can be planned and thrifty instead of impulsive. Besides, do you need that gym membership?
Fitness and weight-loss goals can be achieved by running outside instead of on a treadmill and by getting inexpensive weights for training at home. Additionally, you can streamline your belongings and sell the stuff you don’t use or need anymore.
Understandably, you may not want to give up on many of these everyday luxuries and minimalism is not for everyone. But these small cutbacks can easily add up to a sizeable amount which will help you get out of debt quicker.
Look for ways to cut costs while in school to decrease the need to borrow funds. If you must get a meal plan at school, buy the cheapest option, then improve your dining hall meals with the food you buy at the grocery store. Purchase used textbooks, check them out of the library if you can, or share costly books with friends who are taking the same course. Invigorate your wardrobe by having clothing swaps with close friends or by shopping at a nearby thrift store.
There’s a rationale as to why so many people today are preaching the idea of adopting a minimalistic lifestyle. Not only is it easier on the mind, but it is easier on the wallet. Living below your means can eliminate some of the monetary hardships you might otherwise be facing. Once you start being happy with less, you’ll love the flexibility of having extra money on hand.
5. Avoid Credit Cards
Last but not least, put off credit cards for when you start a full-time job after graduation.
Sure, when used correctly, credit cards offer great perks such as free flights, insurance, and fee reductions. But even slight carelessness, let alone recklessness, will negatively impact your credit score. And a poor credit score makes it difficult to be approved for a mortgage, car loan, or even an apartment.
You see irresponsible usage of credit cards is psychological. Because buying a $1,200 laptop or smartphone won’t seem that big a deal if you just sign a receipt and don’t have to think about paying for a month.
On the other hand, you can physically feel the dollar bills, leaving your hand when you pay with cash, giving you a better sense of how much those items cost and how much money you now have left in your dwindling wallet. To a somewhat lesser extent, this can also apply if you pay by check and promptly record the purchase in a chequebook that shows the impact on your account balance.
Credit card debt, with its high-interest rates and unnecessary fees, can be even more exorbitant than student loan debt. If you’re already battling a student loan debt, it’s sensible not adding pricey credit card debt on top of it.
Surviving without a credit card at a time when electronic payments are becoming the norm can be difficult, but there are always options. You can use a debit card, which is tied to your checking account, in nearly every transaction where you’d otherwise use a credit card.
It’s all about prioritizing your finances. For each potential expense, ask yourself if it’s a “need” or a “want”?
The points outlined above may seem obvious to you, but many students are still quite incognizant of the impact college debt can have on their future. If you wish to learn some more advanced tactics to minimize your student debt, such as applying for public service loan forgiveness, signing up for Auto Pay, loan consolidation, and more.
So, how are you minimizing your student debt? Are you feeling encumbered? Do share your tips and tricks in the comments below, it might help someone in the same boat as you!