The U.S. Department of Treasury recently released a report entitled “Opportunities to Improve the Financial Capability and Financial Well-being of Postsecondary Students.” I read this report because I am an intern in the office of Federal Student Aid at the Department of Education, and I am working on various projects related to financial literacy for college students. I actually found this report to be a worthwhile read as a college student embarking on the daunting journey of funding my college education and managing my money while in school.
Despite the heavy financial burden, most of us understand the necessity of a college degree. Report after report make evident that education is one of the most significant factors in upward economic mobility. Still, college students face not only education loans but also consumer debt. There are so many important decisions that college students have to make in support of the ultimate goal to become financially independent. And, as tuition, books, housing and more only rise, the dream of financial independence has only become more difficult, and stressful.
Although I am no expert in financial literacy and financial aid, learning about responsible borrowing, careful budgeting, and repaying loans on time has helped lower my financial stress. The following are some simple tips I’ve learned that can alleviate financial stress and help college students manage their money.
1. Borrow responsibly.
Federal Student Aid offers resources to help students understand the borrowing process.
First, know how to read the financial aid package your school offers you. Be sure you can differentiate among grants, loans, scholarships, and work-study offers. You can do this by talking to the staff at your school’s financial aid office. Next, talk to your parents or those contributing to your education. Review the financial aid offer from your school, and look at your family’s finances, to decide which aid to accept or turn down. This is important in calculating how much you need to borrow in order to afford your education. You do not need to accept the full amount of loan money that’s offered to you; and understanding that concept will leave you with less debt in the future.
2. Budget carefully.
Budgeting is vital to lowering stress. By adopting responsible budgeting habits, you’ll learn planning skills to help manage multiple priorities and prepare for the future. Healthy budgeting practices provide dual opportunities for money-saving and time-management techniques. Budgeting is a great financial foundation and can be a stepping-stone to handling greater financial responsibility, leaving lifelong benefits.
3. Repay on time.
Repayment is the final step of the student loan process and lasts long after you graduate. If you do your research, the repayment process can go a lot more smoothly.
One way to reduce your stress is to understand the different repayment plans. You might find that you meet the criteria for making payments based on your income. Use the Repayment Estimator to help you understand the different repayment plans and decide which one is best for you. Then contact your loan servicer to see how to apply for the plan that best fits your situation.
Another thing to be aware of is that there are certain loan forgiveness options, including one for those who work full-time in public service. Knowing who qualifies and how to apply can ease the stress you feel about your debt as well.
Lastly, know that forbearance and deferment (ways to postpone or reduce your payments) are options if special circumstances arise. Understanding what’s best for your situation and applying in a timely manner is something you need to be aware of and talk to your servicer about.
As the report says, “Postsecondary education is essential to the economic health of our nation and to the economic opportunity of many Americans,” and each of our personal financial decisions contributes to that!
Megan McCusker is a sophomore at Loyola University Maryland studying History and Spanish. She served an intern for U.S. Department of Education’s Office of Federal Student Aid.