If you’re like most college students, you will graduate with more debt than you can bare. And now that interest rates are set to double next month (no joke), this reality is only becoming scarier. I would love to tell you that I have some secret tip to keep you from racking up loan debt, but I am still trying to figure that one out. What I can tell you is that it is in your best interest to start budgeting your money early on to avoid any additional, unnecessary financial burdens. But as the saying goes, it’s easier said than done!
I find it especially hard to save money during summertime. If I have a good night at work (I’m a server), I have no problem spending a bit more than I usually would. Or when I get my paycheck, I feel the need to “treat” myself to something. Needless to say, I like to spend money, and I forget about the saving aspect. However, I will say that living on my own has forced me to start, or at least try to start, budgeting my money. I have to make rent each month, buy groceries and have enough gas in my car to get me to work or to my internships.
Here are three quick tips that I recommend if you’ve never made a budget before:
1. Don’t Lie To Yourself
When you first create a budget it is important to be honest and realistic. If you know you spend a lot of money on food, include that in your budget. Having future goals to cut spending is great, but don’t anticipate those changes in your initial budget or you will be sure to fail and overspend.
2. Every Penny Counts
An iced latte here and a bag of nachos there doesn’t matter, right? WRONG. The little things add up quicker than you realize, and before you know it you’ve spent $50 on Skittles. If you can hold off on the little things then you’ll have more money to spend on something you’ll get to enjoy for longer than 10 minutes (like a new pair of shoes)!
3. Take Advantage of Rentals
If you’re like me, you hate textbooks. They’re boring, they’re heavy and they’re expensive. The worst part? You have to have them. If you want to save money, and you have no intention of keeping your textbooks, rent them online. Take it from me, eCampus.com has the best selection of new and used textbooks to rent!
I know I still have a long way to go before I’m really good about saving my money, but like I said, I really feel that living on my own has helped me to start budgeting better. Do you have any helpful tips for those that are just starting out?
Disclaimer: This post is intended to educate students about their options, not to encourage fraud or irresponsible fiscal behavior. Bankruptcy, no matter what kind, will severely limit credit for an entire decade if not longer, and makes future bankruptcy next to impossible, even in light of catastrophic circumstances, like outstanding medical debt.
Student loans, like child support payments and criminal fines, can be garnished from wages. Garnishing means you never see the money. Like taxes, the payment is sent to the debtor before you receive your check. That means if you’re a server, when you receive your paystub it will show a negative amount. Not a pretty scenario.
This circumstance came about when the government (taxpayers) became the sole backers of student loans. They put banks out of originating federal student loans, presumably to keep banks out of the lucrative fee business on a young, fiscally unknowledgeable group. At 18, it’s much easier to sign on the dotted line without reading the fine print. Why? Because no one has ever held scary amounts of debt over your head, making threatening phone calls and initiating wage garnishments, and Democratic representatives in the Senate fought to keep it that way. As a result, policy for loan forgiveness on the Federal side is directly tied to taxpayer dollars and private loan options are shrinking.
Fast forward 10 years and some uncomfortable truths require reckoning: students with no assets to speak of are bad creditors by definition, and the sheer size of loans (up to 4x the annual salary of the average graduate, after securing a full-time job with benefits). Declaring bankruptcy for student debt is very difficult, accruing interest and destroying credit in one fell swoop.
Of course, there are a lot of resources for students and graduates who are delinquent on Federal student loans, including reduced payment plans as part of “default diversion” programs and options to postpone payments in times of temporary hardship. If the hardship isn’t temporary, students need to know their options, and bankruptcy, though a last resort, is one of them.
A common test of undue hardship is the Brunner test which requires a showing that 1) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans; 2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and 3) the debtor has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987).
It’s very difficult to prove undue hardship, but if it does occur, know that bankruptcy isn’t impossible, and in some cases, even prudent. Keep an eye out for reforms, which may make it easier to discharge student loan debt in the future.
I’m reading America: A Narrative History, Brief Volume 1