10 financial tips for college students

Most college students are living on a budget, here are some tips that may help with financial success while you get the grades

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Here is a list of 10 helpful tips to save money while you are in college:

1. ENTERTAINMENT: Instead of spending money on music, use free streaming services like Pandora or Spotify. Cut out expensive cable packages. You can watch many shows online for free if you wait a bit after they air on TV. Participate in campus activities and free movie nights.

2. SHOPPING: Don't go to the supermarket when you are hungry and try to split grocery bills with friends. Don't spend money on cigarettes or alcohol.  Don't buy the top college meal plan. Use your student discounts. Don't buy paper, that's what the lap top is for. Avoid coffee shops, make your own.

3. CLUTTER: Use eBay, Craigslist or Poshmark to get rid of stuff that you don't need. You may have an extra chair or desk that you barely use. Designer clothes that you haven't worn in years. You only need one bicycle, so get rid of the others.

4. PETS: Have relatives take care of your pets. If you love animals try to volunteer or get a part-time job as a dog walker. Avoid the veterinary fees at all cost.

5. OLDER STUDENTS:  If you are a parent, check with your school to see if childcare is offered. Trading childcare services with another parent can also save you money.  If you own a home, instead of paying for house maintenance try to enlist family members or close friends. 

6. DEBIT CARD: Students who receive a debit card in the mail are under no obligation to activate the account to receive financial aid. To avoid fees, sign for the transaction as if it were a credit card. Use banks with low out-of-network ATM fees.

7. CHECKING ACCOUNT: Avoid overdraft fees by not signing up to recurring monthly charges or using checks. Open a savings account with a credit union.

8. SECURED CREDIT CARD: Cards that send reports to a credit agency can help build the student's credit score.

9. PREPAID CARD:  Although they are less risky in many ways, they don't come with the same protections as credit and debit cards if lost or stolen. Find out if they have fees before you get one.

10. TUITION COST: Find out if there are classes that you can test out.


Interview with Tim Higgins, a certified college planning specialist and author of "Pay for College Without Sacrificing Your Retirement."

Q: What are some strategies that parents of college-bound students can pursue to limit their expenses?

A: There are two good options that people were less enthusiastic about five or seven years ago: looking at in-state public schools or at private schools that may be safety schools (fallback choices) for your student.

Whenever you're looking at state schools outside your own state, the costs almost double. A lot of students tend to think it's more glamorous to go out of state, but as a buying decision it's gotten to the point where they may need to consider in-state options.

Wealthy private colleges where your student is going to be one of the better students coming in may be willing to give you merit-based money or be much more lenient in their need-based formulas to lure the students they want.

Q: What's a cost-cutting option that's often overlooked?"

A: One top strategy that people often don't think of as a financial strategy is SAT (or ACT) test prep. This is huge, because it not only helps you get into schools where the door wouldn't have been open but can bring thousands of dollars in merit-based aid. I think it's one of the best investments parents can make in the process.

It might cost you $200 for an online program, $500 or so for classroom prep or up to $2,000 or more for personal tutoring. Two of the online programs are Peterson's and PrepMe. Peterson guarantees that the student's SAT score will go up by 200 points, and PrepMe claims its average student goes up 305 points. Those are dramatic increases.

Q: What's an appropriate amount of debt to take on?

A: One question I often get from parents is what is the right amount for the student to borrow. It depends on the family's finances and what field they're going to go into and how much they're going to be making. I like to cap the student borrowing at the (federal) Stafford loan rates, which works out to $27,000 over four years. That would be somewhat equivalent to a car payment for the student when they get out. Once you start getting up into the $40,000 range, the $60,000 range, that's a ton of pressure on the student to be able to make those payments.

For parents, I'd say do a financial plan. Maybe the answer as to how much they contribute is zero, depending on what they want to do. And that's fine — that just makes them focus on different colleges that they would purchase, such as spending the first two years in community college.

Q: Under what circumstances would you recommend tapping into home equity to pay for college?

A: If there's going to be parent borrowing, I often recommend looking at home equity first. A lot of things have changed — home equity has decreased because values have decreased, and it's tougher to get lines of credit. But still, it should be pursued because generally rates are more attractive.

If you have to borrow, it makes the most sense to do so in the student's name and to use Stafford and (high-need federal) Perkins loans. Those are the best borrowing rates and the most flexible. For parents, it's out of your name. And I've read studies where students do better and take school more seriously if they are taking on some of the financial burden.

Just remember to fill out the FAFSA (Free Application for Federal Student Aid) even if you suspect you won't qualify for need-based aid. You'll need to if you plan on borrowing a portion of college costs through the best loan programs available.

Q: What do you tell people who think that by having less savings they'll qualify for more financial aid?

A: That's one of the biggest myths out there. It gets you off the hook, and people like to use it as an excuse. You've got to be saving. The key is to have savings in the right places. That's why I recommend the Roth IRA, if you qualify, which won't hurt you at all.

Even if you have money in a 529 savings plan or a brokerage account, only a small percentage of parents' savings is assessed in financial aid formulas. And colleges typically allow parents to have between $30,000 and $60,000 as a cash reserve, so savings up to that amount may not even be assessed.

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