While most of us are enjoying the long warm days of summer, graduates of the class of 2018 are thinking ahead to fall. Many of them will be headed off to college, where they will be paying bills, managing their money and perhaps doing it all on their own for the first time in their lives. Ryan Betz of Olympia Federal Savings (Oly Fed) has a few tips to help out college bound students be money smart.
Make a Budget
It is important to make a budget and stick to it. Budgeting allows people to track their spending habits and make sure their money is working for them. “It is important to establish a budget early on,” says Ryan, “and understand what your expenses will be.”
Take Advantage of Technology
Their parents’ generation relied on the check book register and saving passbook to keep track of their spending. The youth of today are growing up in a tech savvy world where their account balance is just a keystroke away. Online banking, mobile apps, and even text alerts make it easy to know how health their account is 24/7. Most of these features are complimentary, but patrons should check with their banks to ensure there are no hidden fees for convenience services. Also, even though technology has made it possible to see balance changes from minute to minute, remember the posted balance and pending balance may differ on the account while payments wait to clear.
Don’t Be Afraid to Ask for Help
“When they graduate most students will not have the basics of financial knowledge under their belt,” says Ross Lindsey, a Bonney Lake High School class of 2018 graduate. “Many students do not take money management seriously. Especially since it is not taught heavily in school these days.”
Ross is somewhat unique among his peers. His mom, Lisa, works for Oly Fed as VP of retail banking and wealth management. However other young people may not have a parent as versed in financial matters. Finding someone to help them make sound financial choices is a good way to start off on the right foot. An extended family member, an experienced friend or a banking professional can be a great resource for young people just starting out. A mentor can advise from experience, be a sounding board to their mentee, and offer objective insight and support in matters of money.
Credit Card Traps
College campuses are a favorite hunting ground for credit card companies looking to sign up new clients. With the lure of hundreds or even thousands of dollars of credit suddenly at their fingertips, young people can quickly find themselves buried under an avalanche of debt. “It’s important to develop credit,” says Ryan, “ but if you are going to have a credit card you want to make sure you have the money to pay if off at the end of every month so you are not digging a hole for yourself.”
Student Loan Debt
Student loan debt is a growing concern for many college students and their families. According to the Federal Reserve, student loan debt just passed 1.5 trillion dollars in the United States this year. While the decision to take on this debt must be evaluated from family to family, there are some things students should consider when taking on this type of debt.
Student loan debt cannot be discharged during bankruptcy. That means, until you pay it off, your student loan will follow you forever. There are a couple things students can do to manage the debt. First off, know the difference between a subsidized and unsubsidized loan. Both subsidized and unsubsidized loans are loans made by the federal government. They have generally lower interest rates than loans made through private institutions. Subsidized loans have an added benefit. While a student is enrolled in college at least half-time (and as long as they are enrolled half time in the period following summer break), the US Department of Education pays the interest on subsidized loans.
After completing the Free Application for Federal Student Aid (FAFSA) when enrolling in school, most colleges provide a financial package that shows which type and how much of each loan the student is qualified to receive. Student loans can be used to pay for the obvious expenses, like tuition and books, but they can also be used for living expenses. Students that stick to a strict budget may not need their entire loan amount, which can save them money down the line.
Some students have the opportunity to have their subsidized and unsubsidized federal loans be forgiven. The Public Service Loan Forgiveness Program forgives the remaining balance on loans after the graduate has made 120 qualifying monthly payments under the repayment plan while working full-time for a government or not-for-profit organization employer.
Check out Community Colleges
Students should not overlook community college as a good starting point for their college education. Costs at community colleges can be much lower than four year universities, offering students more bang for their buck. Using community college as a jumping off point for the first two years can shave thousands off the cost of a four year degree. Ross is taking advantage of this option. He will be starting at South Puget Sound Community College this fall.
Whether you are a recent high school graduate or a parent looking to help out your student, Olympia Federal Savings can be a great resource for any questions you may have about personal finances. If you have questions, stop by your local Olympia Federal Savings branch, give them a call at 360-754-3400, or check them out online.
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