5 Steps To Prepare Your Finances For College And Minimize Your Student Loans
This post is in collaboration with Thrivent Student Resources, a thriving hub of tools and resources related to helping you achieve your college dreams with as little debt as possible. Whether you’re going to a trade school, local university, vocational school or any other form of higher education – Thrivent Student Resources wants to get you there with less debt.
College is a big next step for many high school students and even for people pursuing secondary degrees or changing careers. However, the average cost of a four year college education comes in at around $80,000 and much higher if you factor in private colleges.
As a result of this high cost, most people have to rely on some type of debt vehicle to fund their college education, the most prominent being student loans.
That being said, it is possible to greatly reduce (or even completely eliminate) the amount of student loans you take on and in this post I’m going to walk you through 5 steps to help you prepare your finances for college and minimize your student loans.
Step 1: Start saving early
When it comes to saving for college every dollar you are able to save will reduce the amount you owe when you start getting your tuition bills. If you are able get a part time job focus on employers that have some sort of college savings benefit that can offset the amount of money you need to save.
If your parents are helping to pay for college, have a conversation with them to talk about putting money aside before-hand and the various types of savings options that provide additional benefits for college savings, like a 529b. It's a good idea to have this conversation as early as possible so you can determine how much of your college costs your parents can help pay and how much you'll be paying for on your own.
Also to track your savings goal, create a designated account and build your college savings into your budget so you can create a plan for how much you need to save each pay check you earn.
Saving for college is all about taking advantage of the time you have to save as much as you can before your first college bill is due.
Step 2: Compare the cost of your degree at various colleges
Where you choose to go to college can mean a difference of up to tens of thousands of dollars depending on the college you select. For instance, starting out at a community college and then finishing your degree at a 4 year college, attending a state versus private college or going to college in state vs out of state can potentially save you a large amount of money on your college education.
As you compare costs, also look at school rankings and reviews to help you make the best decision that works for you. Sometimes your heart might be set on a college because of its reputation or location but there are many excellent options for colleges that will give you an equally good education. It’s all about focusing on what makes the most financial sense.
Thrivent Student Resources has a great College Saving Estimator Tool to estimate how much you need to save for college that you can check out.
In addition, as you determine the type of school you'd like to attend - whether it be rural, urban private or public, Thrivent Student Resources also has a Cost of College Comparison Tool that allows you to compare the cost of different colleges - so you can make the right decision for your dreams and budget.
Step 3: Research scholarships, grants, assistantships and even crowdfunding!
Scholarships and grants are a great way to pay for college because this is essentially free money (based upon specific criteria). It’s definitely worthwhile to spend some time in advance of when college starts to research different scholarships and grants for your program and apply to as many as possible.
While you might not apply for an assistantship in your first year of college, it's possible to get one as you gain more college experience and advance your education and this can also help knock a chunk off your college expenses.
To make sure you aren't leaving any money on the table, GradPath is a crowdfunding program that allows students to crowdfund college costs, from tuition to books and allows them to connect with their community to help offset their colleges costs.
Step 4: Research your student loan options
Once you know how much you’ll need to take on in student loans (if this applies to you) you’ll need to decide what type of loans you take on. Ideally, you want to try not to take on more than what you’ll earn your first year out of college. Your monthly payment for a loan after college should be no more than 10% of your monthly income. This way you know for sure that you'll be able to pay back your loans based on your future income and within a reasonable timeframe.
Some key factors to keep in mind when you are reviewing your loan options are the type of loan (e.g. federal or private), the repayment options (including rules, restrictions and penalties), the interest rate on the debt, the type of interest rate being offered (e.g. fixed vs. variable) and exactly what your monthly payments will be on the loan before you sign the dotted line.
You’ll also need to determine if the loan type you qualify for requires a co-signer and who that person would be.
Step 5: Research the average salaries paid for degree holders in your area of study
The whole point of getting a college education, outside of the knowledge you gain and expanding your skillset, is to be able to earn a decent income that will allow you to live a good quality of life and that will allow you to pay back your student loans within a reasonable time after you start your career.
If your college education year costs more than the average salary in your field you either want to consider pursuing alternatives of where you can go to college at a cheaper cost or research similar fields or industries that pay more on average.
As a final note, I’ll add that if you do take on student loans, you want to ensure you create a plan to pay your loans back. If you will be working while in college, you can start playing your loans back early or make interest payments to gradually reduce your overall long term debt obligation.
Take these 5 steps will ensure you are well prepared financially for college and have explored the best way to fund your college education and minimize of debt you have when you graduate.
Thrivent Student Resources has an incredible community you can join to take advantage of more insights, tools and resources by becoming a registered user here.
Bola Sokunbi is the founder of Clever Girl Finance and she's passionate about helping women take control of their money so they can live life on their own terms.