In many ways, college is like a crash course in personal finance. You suddenly need to start paying for all of life’s necessities and monitoring how much money you spend. You get a firsthand lesson in debt if you take out student loans to pay for your education. And with little income, you need to learn to live frugally.
College students often don’t have much experience with handling finances and they make their fair share of money mistakes. But some of these mistakes can end up being very expensive.
Here are the worst mistakes you should avoid at all costs.
1. Failing to exhaust all your financial aid opportunities
Although college can be expensive, there are plenty of financial aid opportunities available. You just need to be willing to look for them.
Here are a few ways to make sure you get the most possible financial aid:
- Fill out the Free Application for Federal Student Aid (FAFSA) every year as early as you can. This will ensure you can get any federal financial aid that you qualify for, including grants and federal student loans.
- Ask about grants and scholarships at your school’s financial aid office.
- Search for scholarships in online databases like Scholarships.com, Careeronestop, and BigFuture by College Board.
Depending on what you qualify for, you could end up having much of your educational expenses covered by financial aid.
2. Withdrawing from classes
Every school has a drop date, which is the last day you can drop a class and get a refund on your course fees. If you drop a class after that date, it’s considered a withdrawal, which means no refund.
A withdrawal means you’re throwing away those course fees. Be aware of the drop date every semester and drop any classes you don’t want by that deadline.
3. Not working
Work shouldn't interfere with your studies, but you can still make money while you’re in school. On-campus jobs are a great choice for students, as are part-time jobs with evening or weekend shifts, such as working in a restaurant.
Even if your schedule is too packed during the school year, you can always get a summer job and build up your savings.
4. Borrowing too much
If you need student loans for school, your goal should be to borrow as little as possible to cover your expenses. It may sound nice to have plenty of cash while you’re in school, but it makes your life more difficult when you graduate.
You should also compare your likely salary to how much you’ll need to borrow. One common guideline is that your total student loan debt when you leave school should be less than your first year’s starting salary.
5. Not making student loan payments during college
Since you typically aren’t required to start paying back student loans until six months after you graduate, many students figure they’ll make it easy on themselves and wait until then to make their payments.
A better approach is to make payments while you’re in school, even if it’s a small amount or you can’t do it every month. This cuts down on how much interest your loans accrue and could save you quite a bit in student loan debt.
6. Misusing student loan funds
Although students are usually smart about how they use their student loans, a few use that money irresponsibly. Some use their funds for nights out, and there are even students who have used student loans to finance expensive vacations.
College isn’t the time to live large on borrowed money. You may enjoy yourself in the moment, but you’ll regret it when you have to pay everything back.
You should only use your student loans the way they’re intended -- for educational costs and essential living expenses.
7. Overpaying for housing
At many schools, you’ll have the option of living in either the standard dorms or a more expensive unit with better amenities and more privacy. The other option is to live off-campus, which provides the most freedom, but will also probably cost the most.
Aim to keep your housing costs as low as possible. Even an extra $200 per month in rent is another $1,800 per school year, assuming you’re spending nine months on-campus.
8. Not budgeting
When you’re in college, you may not think about budgeting because you haven’t had to do it before. Or you could figure that you’ll put it off until you’re working full-time.
The problem with this approach is that it’s easy to overspend when you have no idea where your money’s going. You need a budget that specifies how much you can spend monthly in categories such as food and entertainment. Then, you need to track your spending (budgeting apps are great for this) to ensure you’re not going over those limits.
9. Taking too long to graduate
There’s nothing wrong with enjoying your college experience, and you don’t want to take on such a large workload that your performance suffers. But you also shouldn’t relax your pace too much. Each extra semester you spend in school adds your college costs.
To avoid this, make sure you:
- think long and hard about your major so you don’t decide to switch it after years of work,
- find out which courses you’ll need and the order you need to take them, and
- register early for courses to avoid missing out on any that you need.
Making the right money moves in college
Although there are many potential money mistakes you can make as a college student, you don’t need to be a finance expert to avoid them. All you need to do is focus on a few key points:
- Maximize your financial aid.
- Minimize your student loan debt.
- Keep an eye on your spending.
- Get through school in a reasonable amount of time.
If you can do those things, you'll graduate in a lot better shape than many of your classmates!