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Debt Management
Student Assistance Foundation advises students to follow these steps to keep their debt under control, while they are in school and after graduation:
- Get organized. Students should set up separate files for their bank statements, credit card bills, phone bills, gas and electric bills, insurance payments, financial aid papers, loan documents and correspondence from their financial aid administrators. Keep all financial records in a safe place.
- Create a spending plan and stick to it. Students should begin this process by setting up a financial planning worksheet. They should record their income and expenses in a notebook for about a month to get a better understanding of their spending habits.
- Borrow smart. If it appears a student will need to borrow to pay for college, he/she should calculate how much they can afford to repay by looking at their monthly payments, expenses and what they can expect to earn after graduation. It’s imperative to set borrowing limits.
- Start saving. While the prospect of saving may seem impossible to students, even putting away $20 a month will start a habit that will last for a lifetime, and provide a cushion for unexpected expenses.
- Students should pay as they go. While putting off student loan interest payments may be tempting, the cost will be larger in the long run.
- Don’t graduate with sticker shock. Students should keep track of how much they borrow and how much they owe, including interest costs and fees.
- Take advantage of federal tax breaks. Students may be able to deduct up to $2,500 in student loan interest paid each year on their federal tax return. In addition, they should find out if they or their families qualify for a Hope of Lifetime Learning tax credit.
- Be thrifty. Students should live within their means. That means eating out less, living with roommates, clipping coupons and whatever else will help cut costs.
- Avoid using credit cards. It’s easy to get into trouble by using credit cards. Low interest rates tend to jump drastically after introductory rates expire and various fees can be devastating. Students should never let themselves get to where they can’t pay off the balance on their credit cards within a month.
- Attend entrance and exit counseling sessions to make sure you understand how student aid works, and what the requirements are for repayment.