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Updated on Wednesday, September 24, 2014
College is one of the most exciting, memorable times in a young person’s life. It allows you to gain an education, meet lifelong friends, and discover new passions. College can also heavily impact your financial future, because earning a degree can open doors to lucrative careers with rewarding salaries. But, money mistakes during college years can leave graduates dealing with debt and ruined credit scores for decades after getting a diploma. Insight into mistakes made by others can protect future and present college students from falling into the same traps.
Clueless about Financial Aid
Many students attend college oblivious to the amount of financial assistance that is just waiting to be claimed. Mushy Borisute, a senior majoring in psychology, regrets not educating herself about financial aid sooner.
“My parents paid for my tuition out of pocket, so I didn’t see the need to look into any of these financial aid programs,” Borisute explains.
It wasn’t until her senior year that Borisute ventured into the financial aid office to inquire about the tuition assistance program.
“After spending no more than 40 minutes in the financial aid office, I learned that I qualify for full tuition assistance!” Bourisute exclaims. “My parents worked so hard to pay off the first three years of my studies. If only I was a bit more inquisitive, I could have saved them the financial burden.”
Interestingly enough, Borisute is not the only one to ignore tuition assistance programs. According to a survey done by the Institute for College Access and Success, 65 percent of college students are unaware of their eligibility to receive financial aid, and 72 percent are clueless to the amount of scholarships and grants they may qualify for.
Credit Card Abuse
Jeet Singh, a junior majoring in geology, shared his run in’s with his new shiny piece of plastic.
“My mother actually signed me up for my first credit card,” Singh says. “She told me that it’s only for emergencies, nothing more. But, I figured a few small purchases here and there wouldn’t hurt.”
Singh’s small purchases quickly added up to a hefty $7,000. With no job, Singh was unable to keep up with payments, which landed him and his mother who cosigned with him, in a pit full of credit card debt.
“I’ve long since realized that I can’t be trusted with money, even if its borrowed money, I’ll spend it,” Singh explains.
Credit cards have high interest rates and multiple layers of hidden fees. The damage of irresponsibly using credit affects both your financial state and credit rating for years to come.
Misuse of Student Loans
Student loans are supposed to be used to pay off education-related expenses, but some students misuse their borrowed funds, which causes a lot of financial pain post-college.
Joseph Dewitt, a graduate student, recalls his irresponsible use of student loans.
“I guess my worst financial mistake post college was using some of my student loans to catch up on bills,” Dewitt says.
At the time, Dewitt was newly married with two young daughters. As an undergrad, he worked as a security guard making only $10 an hour. When his salary didn’t make ends meet, Dewitt used $2,000 in student loans each year to stock his fridge and catch up on delinquent bills.
“I took whatever I could for student loans each year and put it towards food and outstanding bills” Dwight explains, who owes $51,600 in federal loans.
What most students fail to realize, until it’s too late, is that the interest on these loans can add up fairly quickly, sometimes defeating the whole purpose of attending college to increase salary potential. By the time Dewitt finished his undergrad and landed his first job, he ended up making less than he expected after his student loans, miscellaneous bills, and graduate tuition was paid off each month. His undergrad loans ate away a huge chunk of his income.
“If I used my loans for tuition, and tuition only, I could be contributing more to my 401(k) and enjoying more of my take home pay,” Dewitt says.
Staying in college too long
Yes, college is a great investment, but before enrolling, it’s important that you plan out the next four years. Extra semesters due to poor planning can cost thousands of dollars. For Sangee Kumar, a senior majoring in accounting, the extra year was needed for him to become a CPA.
“I knew that I needed 150 credits to become a CPA, but I thought that I could do it in four years,” Kumar says.
The intense accounting classes became too much for Kumar to bare, so, for the sake of maintaining a GPA above a 3.5, Kumar decided to stay in school for an extra year to reduce his workload.
“Financially, I didn’t plan on it. I mean, tuition rises every year, now I have to find the extra money to pay for the remaining two semesters,” Kumar explains.
The extra tuition payments could have been avoided if Kumar, planned accordingly. Students should not only look into the return on investment when choosing a degree, but whether or not the intended workload can be completed within four years or less. Some degree’s, like accounting require five years to complete. Proper research can prevent unexpected expenses in the future.
The Bottom Line
It’s important that you learn from these four financial mistakes that are frequently made by college students. Save yourself a future of financial heartache and make the necessary adjustments to your spending habits to guarantee you use your money (borrowed or not), wisely.
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