by Sasha Grabenstetter
With student loan debt topping $1.08 trillion as of December 31st, 2013 according to the Federal Reserve Bank of New York’s Quarterly Report, it has significantly surpassed credit card debt and become one of the most underestimated financial burdens that a young graduated can face. As a student, here are some ways to help yourself now while you’re still in college so that you don’t have to pay back so much more later:
- Know Your School Costs – As a student, it’s easy to forget how expensive a college education can be. Tuition, room and board, books, and school supplies can add up quickly, not to mention food and entertainment as well. Identifying these costs upfront can help to curb extra spending you may encounter. Knowing that your first freshman semester expenses were over $10,000 might make you rethink buying that late night pizza.
- Check Your Balance – Looking at your student loan balance may also entice you to stop adding more debt to your future self. If you don’t know what your balance is, check out the National Student Loan Data System, a website created to make students aware of their loans. Most college seniors go into exit counseling unaware of how much debt they racked up in the last four years.
- Limit the Amount Borrowed – Although this seems straight forward, lots of students are unaware that they don’t have to take the full amount awarded to them each semester. For example, you receive $5,500 in awards for the school year, but your expenses are only $4,400. When the cash is in your checking account, it’s easier to spend it on extras than to pay it back.
- Pay Student Loan Interest While In School – There are two types of student loans regarding interest, subsidized and unsubsidized. With a subsidized loan, interest does not accrue on your loan and the government “subsidizes” or supports the interest in times of deferment. With an unsubsidized loan, the interest starts to grow once the loan is disbursed to the school and you are responsible for paying that interest. By paying the interest while you’re still in school, this strategy can help reduce the overall balance of your student loan. Upon graduation, the difference between these two will be that the unsubsidized loans from freshman year will have three years of interest added to the principle while the subsidized will have none.
According to a study by Richard Fry of Pew Research, students with a college education and no student loan debt were worth 7 times more than students who had accumulated student loan debt. For some students acquiring student loans may be the only way they can get a college education, but being aware of the school costs, knowing and limiting the amount borrowed and paying on the interest accrued while in school can be excellent steps towards achieving college education and financial independence after graduation.
Sasha Grabenstetter is a former Office for Financial Success Counselor and Mizzou Alum. Sasha currently works for the University of Illinois Extension as a Consumer Economics Educator.