10 Tips for Managing College Finances Before, During and After Graduation
This is a BECU sponsored post from guest blogger Emma Cortes www.emmasedition.com
I'm one of those kids who graduated from college with $30,000 in student loans. I entered college knowing that I would graduate with student debt. My family lived paycheck-to-paycheck my entire life. It wasn't until my senior year of high school that my parents revealed that they had no savings for my college education.
Like many immigrant families, my parents stressed that college and an education would be a path to a better life, but my family had no idea what the price of that educational path would be. Like many families, we didn't realize the real cost of college until I started getting accepted to schools and received financial aid packages. We were shocked when we saw the cost of tuition, books, and room and board.
My parents agreed to help me finance the first two years of college with federal student loans. They qualified for Parent PLUS Loans and I qualified for subsidized and unsubsidized Stafford Loans. Since my student loans were capped at $5,500 my first year and $6,500 my second year, I had to convince my parents to co-sign the Parent PLUS loans. My family felt extremely stressed but they agreed to help me with the first two years of school.
I financed the rest of my education with federal grants, scholarships, part-time jobs during the school year, and my two summer internships at Boeing. Even though college was one of the most financially stressful times for my family and me, we made it work. If you or your child are enrolled or about to enter college and are stressing about how to pay for school, this article is for you. Use my tips to help avoid the all-too-common financial panic.
1. Start saving for your child's education early
While my family wasn't in the position to save for college early, I now know the importance of doing this for my future children's college education. If you're in the position to start putting away funds for your kid's college education, you should start now.
You can start a traditional savings account, a certificate of deposit or a 529 prepaid tuition plan. You can learn more about the types of accounts you can start for college from BECU's article: Paying for College.
One of my tips for saving early is to set a goal for the amount you want to save. For instance, if your child is five years old and you want to save $30,000 by the time they're 18, you know you have 13 years to save. You would have to save $2,000 a year or about $167 a month to meet your end goal (not counting any interest you may earn). You can set up a dedicated savings account where you can automatically transfer funds from each paycheck to help meet this ambitious, but doable savings goal.
2. Research the costs of college
My family had no idea what the cost of college was until I started receiving my financial aid packages. My family was shocked to learn that annual tuition alone at the University of Washington was $8,700 (when I started in 2010). This didn't even include room and board or a dorm meal plan. I would recommend researching the costs of local community colleges, four-year state colleges, private universities, and vocational/technical schools in your state before your child enters high school. This takes away some of the sticker shock and can help set expectations on what is and what isn't financially feasible. Additionally, don't forget to factor in other miscellaneous but mandatory expenses like room and board, books, transportation, meal plans and meals off campus.
3. Research the types of loans that are available
If you're heading to college soon, you should also be aware of the types of loans that may be available to you:
Federal loans: These include Direct Subsidized, Direct Unsubsidized and Direct PLUS loans.
Private Student Loans: This type of loan is issued by a financial institution. The student must be enrolled in or attending an eligible school. This loan can be used to cover the gaps in your budget not covered by other financial aid.
Student Refinance Loans: This type of loan allows borrowers to combine private and/or Federal student loans into one payment. This is available to students who have graduated from an eligible school. One of the main benefits from this type of loan is that student loans are usually combined into one payment at a lower rate and monthly payment.
I'm excited to announce that BECU is now partnering with LendKey to offer both In-school Private Student Loans and Student Refinance Loans. Check out your local BECU branch to find out more or visit their student loan landing page.
4. Create a budget and stick to it
If you're taking out student loans, you don't want to borrow more than you actually need. Create a budget and outline your expenses and income coming in each quarter or semester to help you stay on track. Personally, I used an Excel spreadsheet to track my budget. Here are a few questions that helped me build a budget during college:
- How much is the dorm and meal plan each quarter/semester?
- How much is your apartment rent (if applicable)?
- How much is tuition per quarter/semester?
- What's the average cost of books per quarter/semester (rent vs. buy)?
- How much is your weekly grocery budget (if applicable)?
- How much do I honestly need for extra spending money?
- And if you can afford to bring a vehicle on campus, how much is gas every week and the cost of car insurance?
Personally, I was strict about my grocery budget. I lived off $30-40 a week in groceries for three years (I had a meal plan my first year in the dorm). I only allowed myself to eat out once a week – usually I picked up Thai food or Chipotle because I could make it last two meals. I also knew how much produce, salad mix and snacks I could buy with $30-40, so I did my best to only purchase the necessities.
5. Live within your means
If you're financing your education with your own savings or student loans, you have to get real about what you can and cannot afford.
In movies, college is portrayed to be filled with spring break vacations, partying and study abroad trips. In reality, all of those things cost money and rarely make the cut. If you're paying for rent and tuition first, you might have to strike out studying abroad or eating out three times a week if your budget doesn't support those things.
Use an automated budgeting tool like BECU's Money Manager to get an honest look at how much you're spending and where those funds are going. The important part is to set a realistic budget and stick to it.
6. Consider working part time or full-time during the summer
If you're living on or near campus, there are a lot of flexible campus jobs that can help cover expenses like groceries and books. I made $10 an hour working the front desk at the Student Activities Office my senior year of college. Even though I only worked up to 10 hours a week, it still helped. I recommend checking out your college's job boards to see what's available.
Personally, I interned full-time for two summers at Boeing. My summer internships helped me save enough to pay for my apartment rent both my junior and senior year, allowing me to borrow less through student loans.
7. Understand loan repayment terms
If you take out federal loans, you have six months until your first loan payment is due after graduation. However, different loans have different terms and interest rates. If you use a mix of private and federal loans it's important to understand the interest rates and know if they remain the same or rise after six months.
When I accepted my student loans freshman year, I learned that I would have 6 months grace period my monthly loan bills would start. I knew I had to have a job lined up before I graduated senior year so I could make my loan repayments on time.
8. Have a job lined up before you graduate college
It can take 3-6 months, or longer, to find a job after college. Be patient, but frugal. However, if you know your loan repayment starts six months after graduation, you know you need to have an income coming in before that.
If you're looking to line up a job before you graduate college, you have to create a game plan before entering your senior year. You should prepare your resume for recruiting season and attend fall job fairs. You should also connect with employers when they visit campus.
The earlier you start looking for a job, the less stress you'll experience approaching graduation. I was so relieved when I signed my full-time offer in December of my senior year. I was able to enjoy winter and spring quarter because I knew I wouldn't have to worry about looking for a job.
9. Continue to live within your means
When I earned my first few paychecks working for PepsiCo out of college, I was so excited that I could spend more than $40 a week in groceries and still go out to brunch. However, I quickly learned that my frugal lifestyle actually allowed me to save once I had a larger, more regular income.
While it can be tempting to buy a brand new car or sign a lease for that expensive beautiful downtown apartment, it's still important to continue to live within your means. Learning to live within your means even after college will help you save for the next phase of your life and pay off student debt sooner.
10. Set a goal for your repayment plan
If you graduate with $30,000 worth of student debt, when do you want to pay that off? Do you want to pay it off in 10 years? Or maybe five years? How much interest is going to accrue in 5-10 years?
Determining how quickly you can pay back your student loans will help you determine how much you need to pay each month beyond the minimum due. Personally, I was okay with paying back my loans in 10 years and I'm on track to achieve that goal!
What are your tips for college finances before, during and after college graduation?
Emma is a Seattle fashion/lifestyle blogger. Her blog and Instagram @emmasedition inspires the modern woman with fashion, career, and life tips. She loves looking for the most Instagram worthy places in each city she visits and walking her dog Boone.
She's been a member of BECU since 2011. Emma is also a graduate student at the University of Washington and works at the Boeing Company.