Learning to Handle Finances

By Broadside Correspondent Desiree Roberts

As college costs increase each year, so does the amount of student debt. Many students are unsure how to maintain good credit card ratings and loans for tuition.

Through analysis of George Mason University’s budget plans for the next three fiscal years, Mason plans on increasing the cost of tuition by a factor of 10 percent in 2009, 10.1 percent in 2010 and 10.3 percent in 2011, according to budget.gmu.edu.

According to ason’s budget Web siteM, the university is also planning on increasing student fees in 2009 by 10 percent. Many students are finding their debt accumulating because of student loans. However, there are ways to smoothly and effectively finance a college education that will help students stay on top of their credit and finances.

According to Mason’s financial aid adviser Mike Farrell, the most common mistake that college students make in regard to the loan application process is taking out too much money. Students often take out significantly more funds than they need in the beginning of their collegiate career.

Afterwards, when students actually need the money, there is none left or problems arise in acquiring some more funds. One way to keep debt low is to borrow conservatively and keep in mind that although after graduation there is a six month grace period to begin repaying the loan, the bottom line is, the loan still must be repaid.

An important question to be asked is: What happens after students graduate and the six month grace period has elapsed but they are still unable to pay their student loans? There are quite a few options to alleviate the problem.

If they have multiple student loans, students may choose to consolidate them. This will allow them to lower their interest rates and monthly payments, as well as reduce the number of creditors according to StudentDoc.com.

An alternative solution, according to Ferrell, involves setting up a repayment plan with the government. If a student has a private loan, they may want to consider consulting them about their financial situation. Often times there are ways that the lending companies can either defer the payments another six months, or reduce the monthly payments.

Below are three important guidelines for students to know in order to properly maintain credit cards and student loans.

The first suggestion is to know the amount that is owed to the banks and credit card companies. This includes all consolidated and non-consolidated student loans, in addition to any credit card debt that may have racked up during four years of college.

The second tip is to keep debt level low. As tempted as students are to borrow in excess in order to enjoy life during the semester, consider whether or not the amount is beyond a reasonable budget.

For students who must take out loans in order to pay for school tuition, they are advised to accept the minimum loan amount necessary to cover costs.

It is important to obtain federal student loans first and also to restrict credit card use. Impulsive purchases can end up costing a lot for students who are not careful. The primary key to keeping debt level low, however, is creating a budget and sticking to it.

The final piece of advice is to maintain a good credit rating. It shows that bills are being paid on time. People should apply for credit cards only when necessary and balances should also be less than 50 percent of the available credit balance. By maintaining good credit, it will provide long-time benefits because it will also accrue lower interest rates on items such as houses or automobile purchases.

Therefore, it is imperative to set up a payment plan with lenders when students are unable to pay student loans because once a default occurs, it not only causes credit card companies and banks less likely to offer a payment plan, but it also negatively impacts a credit score.

Students interested in obtaining more information or asking questions about credit ratings and loans, should contact the financial aid office or a financial aid adviser.

According to Mason’s financial aid office, various workshops are held throughout the year in Arlington, Va., where important aspects of credit and student loans are covered more in depth. The most important aspect is that students should be aware of the facts about student loans and credit now, in order to prepare for the future.