Budgeting can minimize your student debt

Michelle Marchante/Opinion Director

Debt is every student’s worst nightmare. It’s the monster that hides under your bed —the Chuckie of college life— but it can be combatted and eventually defeated. You just have to play it smart.

According to the University’s Financial Aid Office, the two most common loans found among students are the Federal Stafford Unsubsidized loan, where interest fees start the moment the student accepts the loan and the Federal Stafford Subsidized loan, which is need-based and is the most ideal for students as no interest is charged until graduation.

While the total amount of the debt makes it difficult for the student to pay it off, the rising interest makes it harder. However, there are ways to budget your money so that you can start paying it off before you graduate.

Most students have a part-time or full-time job, or may even have an allowance that gives them some type of income either weekly, biweekly or monthly. By putting aside a small amount of money every paycheck into a separate savings account for your student debt or sending in a monthly payment, if you already have interest building, you can get a head start on your payments.

This doesn’t mean you would be debt-free upon graduation but you would grow accustomed to saving and budgeting your money, thus making it easier on yourself to continue that habit after college. However, according to Katherine Grau, the program manager of the Capital Markets Lab, before students can get into the habit of budgeting their money, they need to get their priorities straightened out, set their ultimate goal and plan accordingly.

“The biggest issue students face is trying to live a big life with little money,” Grau wrote in an email to Student Media. “It’s hard to resist the urge to meet your friends for coffee everyday but those small actions will have an impact on your bottom line.”

Managing debt doesn’t just include student loans, but also credit card debt and even car loans, she said, which is why the Suntrust FIU Financial Wellness Clinic is planning to host lectures that provide a “holistic approach” to personal finances to help students become more aware of what kind of debt they owe and how to manage it with their income.

“[Students] can tell you why Kanye West and Taylor Swift are feuding but [they] can’t remember how many loans [they’ve] accepted and what [they] really owe,” she said.

Besides striving for their desired career, every student’s goal should be to graduate with the least amount of debt as possible but Grau agrees that students shouldn’t neglect their schoolwork to work an extra shift. Your priorities, she said, should be to have good grades, connect with professors, attend departmental events and be involved in student organizations as you work to acquire the job of your dreams.

“Students’ number one investment [should be] in themselves,” she said.

But, taking the time to learn how to budget your finances while you’re in school isn’t a bad idea either as these skills can help you for the rest of your life. This is why the clinic, Grau said, is currently in the process of developing an interactive session that will offer students a real-world approach to budgeting. Budgeting templates expect general categories to be planned a month in advance, but in the real world, she said, that’s not realistic.

“Budgeting is a personalized experience based on your individual goals, income and expenses,” she said. “You’re the CEO of your life. A CEO cannot make decisions without financial statements.”

A budget could serve as a student’s financial statement and would help them make informed daily decisions, especially if their goal is to graduate with the least amount of debt. Every financial decision a student takes then, Grau said, should first begin with the question “How does this help me reach my goal?”

Taking the time to sit down and actually figure out a budget plan that works may sound difficult and time-consuming but in the end, it might give you insight into exactly how much you can afford to spend and might even give you some leeway with your debt.

“Once you see where all of your money is really going, you may be able to redistribute funds to repay the interest on your unsubsidized loan or have savings to cover next semester’s expenses,” Grau said.

Debt may be unavoidable for many, but playing it smart is the best way to keep it under control. Being aware of what type of aid you need, the type of aid you’re accepting and making sure you understand its payment requirements is the best way to control your finances. The worst thing you want to do is get stuck paying for a loan you didn’t really need.

DISCLAIMER:

The opinions presented within this page do not represent the views of FIU Student Media Editorial Board. These views are separate from editorials and reflect individual perspectives of contributing writers and/or members of the University community.

Image retrieved from Flickr.