If you’re counting on student loans to pay for college in the fall, you’ve probably already navigated the FAFSA. We hope you’ve also started to think about your repayment options.
After the FAFSA, you’ll receive an offer letter letting you know how much you’re eligible to receive. You’ll have to choose how much money to actually accept.
Have you considered what you’ll do if you get more money than you need?
Bet you haven’t — because that hardly sounds like a problem.
It could be, though. Any money you borrow needs to be paid back, probably with interest.
My financial status going into college meant I was eligible for a lot more aid than I needed to cover tuition. I took it all, and now I’m $58,000 in debt.
Here are two important warnings I wish I’d known back then to avoid racking up so much debt:
1. Don’t Take All the Financial Aid You’re Offered if You Don’t Need It
You can receive some of your financial aid without accepting all of it.
It’s tempting to take everything if you’re awarded more than you need — it feels like free money!
Putting yourself in debt, though, is sooo not free.
Unless you need the relief, don’t consider this an excuse to avoid working.
If you can cover living expenses by working while you’re a student or over the summer, you’ll avoid a lot of hassle and cost in loans.
Decide how much help you reasonably need to cover your tuition and expenses each semester and how much you’ll be able to contribute from savings or wages.
Then accept financial aid awards in this order:
- Scholarships and grants (free money)
- Work-study (earned money)
- Federal student loans (borrowed money)
- State or school loans (borrowed money)
- Private loans (borrowed money)
2. Don’t Use Student Loans for Extravagant Purchases
If you accept the money, only to realize when a refund check arrives you don’t need it… you still don’t have to spend it.
Would it be nice to fund your friends’ spring break trip or go on a shopping spree? Of course. But you’ll pay for that extravagance exponentially down the line, and it may not seem worth it in retrospect.
(Or, maybe it will. Your call. But I’m telling you this now, so you can make an informed decision instead of one you’ll regret later.)
Learn from our mistakes — here are the irresponsible things Penny Hoarders did with their student loan refunds.
Congrats, Grad!
You’re about to embark on an exciting leg of your journey. Some even call college the best years of our lives.
Just… please make smart financial choices now so these years don’t live to haunt you forever.
Leave that job to the tattoo you get around your ankle sophomore year.
Dana Sitar (@danasitar) is a senior writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
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