My son is a junior in High School this year and we are just beginning the journey toward his next educational step- College! We have been bombarded with postcards, articles, emails and invitations from colleges and universities around the nation and in the midst of all of the mailings, I stumbled upon the current statistics on college debt here in America and it is mind-blowing. It reminded me of a blog I had written in 2014 so I decided to share it again with updated data. The numbers were staggering then, now it is just insane. (All the numbers in parentheses are for 2017.) Check it out:
It’s August 2014 and I am right in the middle of my college tour, and one of my favorite things to start my keynote is to ask how many students can tell me what compound interest is.
Usually, less than ten percent (sadly still the same) of those in the room raise their hands.
I look out at the crowd, and I say, “The people raising their hands are only ones who are allowed to get credit cards.”
For many college students, their entire financial plan can be summarized in two words: student loans.
Post-graduation, however, those loans turn into debt, and the new graduates get to join the ranks of 37 million (44 million) graduates with outstanding college loans, averaging at $24,301 ($37,172).
That’s a total of around $902 billion ($1.45 trillion) in American-owed student debt.
Sounds like fun, right?
In order to help combat the debt, I’ve asked Miami University 2013 graduate Nick Shine, who used his degree in finances to land a job with a friend of mine at a financial services firm, to share his insights.
With his fresh-from-college perspective and financial wisdom, Nick has great advice for college students who want to be smart with their money from the start.
As for the top two financial pitfalls that freshman fall into at the start of school, Nick says, “Number one has got to be credit card debt. They get their hands on a credit card and now that they’re off on their own, there is no real supervision and all of the sudden they’re way in over their heads.
“The second one would be not working at all through school. I would highly recommend having some kind of part time job if you can do that on the side. The more you can pay as you go, the better.”
Even though many college students are encouraged to get a credit card so that they can “build good credit,” but Nick doesn’t see the value.
“In my opinion, unless you’re sure you can continually pay it off; it’s really not worth it to have a credit card in college. The marginal credit that you’ll build by making weekend purchases at a restaurant or purchasing your books won’t be enough to offset the cost of the accumulated debt.”
As a highly debt-averse person, Nick recognizes that there is always a trade-off for accumulating debt. While he could’ve attended a community college and avoided taking out loans, Nick chose to accept the student loans so that he could attend a four-year program at Miami University of Ohio.
But throughout college, Nick knew that reaping the value from his investment in school relied entirely on him.
“If you are spending more to go to that four-year school, make sure the investment is worth it and that you’re getting the internships and job opportunities that you need to get that return on your investment. When you’re working hard to get straight-A’s because you know you’re paying a lot, it will lead to better internships and better job opportunities, which, in the long run, will lead to the ability to pay off that debt earlier.”
And it was this investment in himself that led to an internship in college at the firm he now works at full time.
In college, there isn’t anyone to supervise your finances, but if you follow Nick’s three rules, you’ll be sure to graduate with less debt and have an easier time paying back loans.
Let’s review the rules:
1) Don’t get a credit card unless you can pay it off completely every month.
2) Get a part time job to help pay for entertainment. Don’t ever use the excuse that you won’t get a job because you want to have a social life. If you don’t pay for your social life now, you’ll pay for it for years to come in interest.
3) Seek a return on your investment in your education through studying hard and accepting every internship you’re offered. Remember: there is no greater waste of money than a failed class that you have to pay for twice to retake.
Do you have any financial advice for new college students? Hit reply or comment below to share it!
*Image courtesy Morgan