Recent high school graduates face many challenges when planning to enter college. One of these challenges is determining how to manage their finances when applying for financial assistance. Creating and maintaining a budget can allow for the successful management of an individual's finances while in college. Budgeting can help reduce the stressors of academic life and enable them to achieve their financial goals. Budgets are specific to everyone. Here are some tips for recent graduates to prepare for college.
Borrow Smart: When borrowing money for financial aid, it's essential to understand the difference between federal and private loans. Federal loans have a lower fixed interest rate and have better repayment terms than private loans. These can include your Stafford, Perkins, and Direct Plus loans. Alternatively, private loans may have higher interest rates that are variable and are based on your credit history. These loans may not offer repayment assistance and can require a cosigner, like a parent. If loans are needed, only accept the minimum amount required.
See my reference in Dear Graduate, Here’s What to Know About Your Money.
Pay on the loan as you go. If you have additional funds available while in college, pay the interest as you are enrolled. Paying the interest will reduce your future monthly payments when you graduate or enter the repayment period. Understanding loan repayment options, when payments are due, and where to send your payments can prepare you to start reducing the balance on your loan. In addition, developing a budget while in college will allow you to pay, at the minimum, the interest on your loan and can help you save towards future financial goals during and after graduation.
Establish a Budget: In 5 Money Lessons for New College Graduates, I discussed ways that new college graduates could begin budgeting and saving. Here are some more valuable tips.
Establish a budget when the first paycheck is received.
Set up automatic savings deposits through payroll deduction.
Pay more than the minimum on student loans and credit card payments.
Pay off credit card balances in full monthly.
Use a debit card to pay for purchases under $100.
Using these valuable tips and suggestions can create a successful money management roadmap.