While students might be at school for an education, this doesn’t mean they learn everything the real world has to teach them. And while educational institutions employ some of the brightest minds out there, the focus on university curriculum often misses the mark when it comes to teaching students about personal finance. Even those majoring in accounting, finance or economics might not have a good grasp upon their own personal finances and how to avoid mistakes that can cause them to accumulate debt. But there are ways to avoid or at least reduce the chance of encountering the more common mistakes students make that keep them in debt.
1. Overuse of Credit Cards
It’s easy for students who are suddenly out of their parents’ house and on their own to find credit cards as a common means of making purchases, and the rewards that cash back and the most beneficial credit cards offer are very appealing. As they begin to swipe for everything from food and entertainment to books and tuition, the totals being accumulated on credit cards as well as the future consequences can be obsequious and savvy credit card users learn they can move their balances to 0 APR credit cards and keep on charging.
It may be too late before students realize the hole into which they’ve dug themselves with credit card debt, and hefty interest rates can make this a burden that keeps them in debt for years, even decades to come.
2. Overindulging In Debt
Easy to obtain student loans is another way that students might find themselves getting in over their head when it comes to debt. Just because the loans are there, doesn’t necessarily mean a student must take advantage of them. Low interest rates and the temptation of easy money means students might be taking out more money than they need, ignoring the fact that one day it must be repaid, with interest.
3. Budgeting Ignorance
Some students just haven’t had the practice or the need for budgeting in the past. Therefore, when they get to school, there may be few guidelines laid out for restricting their spending. Without a proper idea of income and expenses, a student can begin to live outside his or her means without realizing it until it’s too late and debt has already piled up.
4. Cost Ignorance
It may not be the inaptitude or inability of the student to budget, but rather the ignorance at what the cost of schooling may be. It might come as a shock as a student realizes the costs of books, tuition, room and board, transportation, and all the other items that might accompany the obtaining of a college degree. Being unprepared for such costs might cause the student to get in over his head when it comes to the assumption of debt.
The experience itself can be one of the most educational aspects of college. However, this experience can lead to overspending if students aren’t responsible regarding their purchases. Heading out to campus bars, eating out regularly, and making poor spending decisions can have a student adding significant debt to his education.
6. Not Making Use of College Cost Cutters
There are a variety of ways to reduce expenses at college, in turn possibly reducing required debt as well. It can be a costly mistake if students don’t make use of such opportunities. Things like a part-time job, work study, student discounts on insurance, movies, etc., textbook trading or resale, having a roommate, campus freebies, and similar items can help a student keep costs down.
7. Extended-Stay Schooling
While most parents and possibly many students hope or expect a college degree program to last no longer than four years, anymore, this might not be the case. Going to school longer than expected, even by one year, may increase the costs of an education as well as the coinciding debt dramatically. And if further schooling such as a master’s degree or some sort of certification or internship is required, the costs may expand even more.
8. Wasted Summers
Summer breaks can be a significant opportunity of which students may take advantage. Taking extra classes to shorten the duration of a degree program or working to earn extra money may allow a student to reduce the debt load they might have to take on for their schooling. Whiling away the summer days lounging about can waste this opportunity and be a costly mistake.
9. Splurging After School
The feelings of freedom and adulthood that a student might experience after graduation might be accompanied by a spending spree that hinders the ability to reduce debt and may even have the student taking on more debt. Being out on their own, students might find that items such as rent, new furnishings for their apartment, a new car, and similar big ticket items are beckoning. Restricting these purchases until they have an idea of the cost of living on their own and the amount of education-related debt they must assume may help students in paying off their debt quicker.
10. Not Having a Debt Payoff Plan
Having a plan to help guide a student in the payment of debt may make it easier to stay on track in making payments. Without such a plan, debt can linger for decades, accumulating large amounts of interest and costing the student much more over the long run than it might have if they had made extra payments toward such debt.