Collegiate Dollars and Sense: What Students do Now Can Save Big Bucks Later
This past weekend Penn State University Park Campus and State College saw the return of about 35,000 undergraduate students.
Downtown businesses applauded the almost doubling of the town's population (42,499 as of 2011) and the upcoming return of Penn State Football.
According to an independent study done by Tripp Umbach & Associates out of Pittsburgh and commissioned by Penn State in 2008, students' spending added $932 million to Pennsylvania's economy. The biggest impact can be felt in Happy Valley.
According to a study by Global Insight in 2007, visitor spending spurred by Penn State Football generates more than $352 million annually for Centre County and almost 17 percent of the Centre County workforce supports tourism within the county. It seems only appropriate to offer some sound advice to the returning scholars.
Students face a mountain of financial decisions as far as how to pay for tuition, what types of loans to take, where to live and more. According to the Congress Joint Economic Community, two-thirds of college students earning a four-year degree in 2011 graduated with college debt.
Student debt balance was, on average, 60% of the graduate's annual income. In 2013, outstanding student debt totaled nearly one trillion dollars. In addition, the average college student graduates with $2,200 in credit card debt on top of student loans. College students are starting out at a disadvantage economically, so smart financial decisions during the college years can mean less of a burden later on.
After tuition, room and board are the most expensive parts of college. Students benefit financially if they can live at home and take the bus to college. It may not be glamorous but it will seem that way when you can use your future employment income for buying a house rather than for student loan debt.
Students can also save on expenses by starting their college experience at a smaller college close to home and then transferring to a larger college, or main campus of a university. For those who don't have the option of living at home, the dorm is the next best option. Typically, off campus living costs 10 to 40 times more than dorm life.
Another way a student can ease the financial burden of college is to get a part-time job. This extra income can be used to help pay for fun activities, tuition or books. For students with loans, it's a good idea to pay the interest on the loans while in school – this lowers the loan balance so that when the student graduates, they can focus on paying down the principal.
The average student pays $1,137 for books and supplies each year. Planning ahead to purchase your books for the semester can pay off. Online stores and used books can help lower the overall bill for these course supplies.
Both students and adults need to track their spending to see where their money is going. Saving receipts is the easiest way to stay aware of what you are spending. In turn, having a checking account with an ATM card can help manage expenses as long as you track expenditures and reconcile the account.
Since students are more tech savvy, they may find online banking and mobile apps particularly convenient. Current banking apps allow customers to make deposits, transfer funds, pay bills and check balances, which is perfect for the student on the go.
Just read the fine print before opening a checking account. Most college towns have banks that offer student checking accounts that can help avoid nuisance charges like ATM fees and low balance charges. In addition, it is important to monitor account balances carefully to avoid steep overdraft charges.
Students should also avoid getting a credit card unless they absolutely need one. If a credit card is unavoidable, try a card with a low minimum balance so you don't get caught short in being able to pay it or overdo it on some party night. The $2,200 average credit card balance typical for a graduating student can take a long time to repay.
According to an Adecco 2011 survey, only 57% of recent college graduates are working a full-time job and the average time until a job was found after graduation was six months. It's hard to pay on a credit card and student loans when you don't have a job. While you wait, interest is compounding -- making it more difficult to pay off the balance.
Even though the unemployment rate of college graduates is half the rate of those with just a high school diploma, overall unemployment for recent college grads is still 7.9%. Finding a job is the best way for students to improve their financial situation. Therefore, working every angle to get a job is important -- use the college employment services and build networks at school through volunteering and internships.
Studies show that 60% of the time, a student who gets a paid internship will get a full-time job offer. Unpaid internships only return a job offer 37% of the time. Students need to apply for many jobs and start a job search early. Three of the top regrets of college graduates were failing to start their job search early, not applying for more jobs and not networking in college.
In short, making better financial decisions now can help students buy a house earlier, retire earlier and enjoy the fruits of their labor and diploma earlier.