Moving from home into a college dorm can be both exciting and nerve-wracking, and that’s even more true if you’re using student loans to foot the bill for school. After all, President Joe Biden’s student loan forgiveness plan was brought to a screeching halt by the U.S. Supreme Court in June 2023, and the chances of having future student loan debt forgiven seem especially low now as a result.
In the meantime, interest rates on federal student loans are going to be higher once interest starts accruing again in September 2023. While the fixed rate on Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students taken after July 1, 2023, and before July 1, 2024 is set at 5.50%, the rate for Direct Unsubsidized Loans for graduate students is at 7.05%. Worse, those who take out Direct Plus loans will get a fixed interest rate of 8.05%.
On top of accepting that you’ll pay back the amount you borrow plus interest you’ll start racking up now or later on (depending if your loans are subsidized or unsubsidized), you also need to make sure the degree you earn is worth the money and effort. With all of this in mind, college students should consider the following financial tips before they move into the dorms in the coming weeks.
Find Paid Work (If You Can)
Earning some extra money during college can help you financially in more ways than one. You could use extra cash to cover living expenses you would otherwise have to borrow money for, or you could use extra income to pay for college textbooks, school supplies, and other items you need to finish your degree. You could even make payments on your student loans during college if you have enough extra funds, as many people do when they have unsubsidized loans that accrue interest even when they’re in school.
Wealth educator Jordan Mangaliman of Goldline Financial Services says to look into on-campus jobs that fit into your schedule and are convenient to get to. Mangaliman adds that, in addition to bringing in some extra cash you can spend, a part-time job can also provide experience and organizational skills needed for your career.
Create And Use A Monthly Budget
Lisa Fischer, who serves as chief lending officer at Mission Lane, says the first year of college is a great time for young people to begin learning how to effectively manage their finances. This includes having an understanding of their financial situations but also creating a monthly budget or spending plan based on real numbers and facts.
There is an array of free budgeting apps that help people get a handle on where their money is going every month. You can also regularly update an Excel spreadsheet to track your income and expenses.
Once you’ve established a budget for yourself, Fischer says it’s helpful to write everything down.
“There is power in writing things down and holding yourself accountable for how you spend and save your money,” she said. “Tracking your finances on a regular basis is essential to your financial wellbeing regardless of where you are in life.”
Start Building Credit
You’ll also want to avoid racking up long-term debt during your college years, and particularly high-interest credit card debt. After all, recent Federal Reserve data shows the average credit card interest rate on accounts assessed interest was 20.92% as of February 2023.
That said, this doesn’t mean you should steer clear of credit completely since you’ll want to begin building some credit history before you need it. Monique White of Self Financial says you can start building credit by using various apps and tools to make sure rent payments, utility bills, and even subscription services are reported to the credit bureaus. A popular app used for this purpose is Experian Boost, mostly because it’s easy to set up and is entirely free for consumers.
You can also start building credit with a credit-builder loan, a student credit card, or a secured credit card. Conversely, you can ask a parent or trusted friend with good credit to add you as an authorized user on their credit card account.
Live The Cheap Life
Even if you enjoyed a privileged existence when you were at home, college life is meant to be basic and cheap. This is especially true if you’re living in the dorms and funding all or part of your college experience with student loans you’ll have to pay back one day. With that in mind, you should plan on living a somewhat frugal lifestyle in college so you don’t have to later on.
Jennifer Seitz, who serves as director of education at Greenlight, says college students really need to focus on “needs” over “wants.”
“Especially for dorm room shopping, it can be easy to get caught up in the items we want more than the ones we need,” she said. Not only is moving into the dorms such an exciting time, but it may be the students’ first experience decorating their own space.
After moving into the dorms, college students need to learn to budget their money so they can develop lifelong financial skills and learn from their successes.
“In addition to delayed gratification and future thinking, they’ll learn how to prioritize saving, live within their means, and stay disciplined with their money choices well past graduation day,” said Seitz.
Take Advantage Of Perks You Already Have
Some items included in the college experience are funded with tuition and fees, and you’ll want to take advantage of them as much as possible. Seitz says college meal plans available to students living in dorms provide an excellent example and a good opportunity to save money and avoid financial waste.
“Students should make sure to fully use their meal swipes in the dining hall,” she said. “Even if the food does not equal Chipotle, they’ll be saving money. Then, they can save for bigger ticket items in the future, or a special treat of a weekend dinner out.”
Mangaliman adds that you should look for other resources you can use, including the school library, fitness center, computer labs and student clubs. “These amenities are often included in your tuition or offered at a discounted rate,” he said.
There are also student discounts offered by local businesses around most college campuses.
“Always carry your student ID card and ask if there are any discounts available,” said Mangaliman. “This can help you save money on various purchases, including clothing, food, entertainment and electronics.”
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