Here’s what you shouldn’t do. When I was in college, I used my student loans to finance my lifestyle. I worked at a decent paying job ($9 an hour at a job related to my major was great), but that wasn’t enough – I needed more. So I took out student loans, even though scholarships covered most of my tuition and housing expenses for college. Even worse, I didn’t really understand the value of the college education I was getting – I basically completed a major, decided it wasn’t for me, completed a completely different major, and took enough classes for some minors along the way. After I finally graduated after six years, I had accumulated about $35,000 in student loan debt. Including interest, I’ve paid about $32,000 in loan payments so far and I’ve still got about $16,000 left to go.
What did I learn from this disaster that college students can use today? There are a lot of students out there entering college and taking out student loans to pay for it. The money they’re spending, in the form of loans, far exceeds the money they’re taking in. I know all about it – I was doing this very thing just a handful of years ago. I made some incredibly stupid mistakes along the way, and it takes a lot of hindsight to see the things I could-have-should-have done.
If I had it to do all over again – if I were a college student today with a big pile of student loans building up and not much income – here’s exactly what I would do.
Take the studies seriously.
The cost of college is tremendous. During your years there, not only are you investing the cost of tuition, but you’re also investing the loss of income that you might have made doing something else, like becoming an electrician’s apprentice or starting your own business. If you’re paying $10,000 for your tuition and other expenses and you’re giving up $20,000 in income, that’s $30,000 that each year in college is costing you. That’s more than $500 every week.
What’s the best way to undermine that strong investment? To flunk out. To fail a class, causing you to stay in school longer. Even a poor GPA undermines that investment – you reduce the value of the degree by reducing your opportunities right after college if you’re showing off a low GPA.
Hit the books. If it’s a choice between a side job and the books, choose the books every time. If you need to borrow more money because of it, borrow that money. Don’t undermine the value of your big investment just to save a little bit of money.
Take advantage of the other opportunities, too.
College isn’t just about hitting the books and partying. There are tons of opportunities on a college campus to start building your career and resume, which will improve your opportunities and salary when you leave school (further improving the value of your student loan investment). That’s not to say that the experience should preclude fun, but that you should put effort into joining groups – and spending social time with those groups – that either build leadership skills or coincide well with the topics that you’re studying.
You’re also better off getting strongly involved in a small number of activities than getting weakly involved in a lot of activities. Try out a lot of things at first, find the ones that click for you, then get strongly involved with those. Take on responsibilities with those groups and work towards leadership positions later on. You’ll build valuable relationships with people, learn new things about your areas of interest and about yourself, and build up your future resume, too. Here are some more tips for maximizing the secondary value of the college experience.
You’re a college student – live as poor as you can.
Don’t spend your time dressing exceptionally well – there’ll be plenty of time for that later on. Instead, do most of your clothes shopping at Goodwill and at thrift stores. Don’t think you’re above it – look at your checkbook and realize you’re a person with a negative income – the exact person who should be utilizing such resources.
It’s fine to have a few clothes for special situations, but don’t spend money on a great wardrobe. The typical college campus is teeming with free entertainment – check the campus newspaper for ideas instead of spending money to have fun. Take advantage of the cheap food opportunities, too – for a while, I had a “one meal a day” meal plan in dining services and I’d eat a big meal then, then just snack the rest of the day on whatever was available.
In a nutshell, realize that each time you spend money in college, you’re costing your future, especially when you’re surrounded by opportunities for the most inexpensive living you’ll have in your adult life. Need more specifics than that? Here’s a collection of money management tips for college students.
Use a credit card only to buy books. Pay the bill immediately.
Don’t listen to people who insist that you have a credit card. Research a good one, then use it only once a semester to buy your textbooks. Put that credit card somewhere safe, then pay off the entire bill as soon as it comes in. Never use the card for anything else.
This simple plan gives you the benefits that you can get from credit card use in college (mostly building credit) without the dangerous drawbacks of building high-interest debt that you’ll have trouble paying off.
Seek a job (or other experiences) related to your major, even for lower pay.
If you’re going to get a job in college (most people do), look for a part-time job that’s related to your major, even if it means sacrificing pay. A job that really matches well with your studies is golden on your resume when you graduate – if you already have some years of experience working with this material, then you look a lot better than most people coming out of school.
If you don’t know where to begin, the first place to stop is at your departmental office. Ask around for job opportunities within the major – research work, paperwork, whatever’s available. If you can’t find anything there, look for industries near the college that might relate to what you’re doing and look there. Make the effort to make a personal appearance, as it shows that you’re serious about this – anyone can pick up the phone and dial.
Minimize your debt.
If none of the above apply to a decision, make the choice that results in the lowest debt when you graduate. You’re in college to build your future. Don’t sacrifice that future by piling on debt without improving your post-graduation opportunities.
In a nutshell, maximize the value of what you’re paying for, and minimize the level of debt. You’re surrounded by valuable opportunities in college – only by grabbing them by the horns can you really maximize the value of your college education.