FINANCIAL LITERACY & LOAN MANAGEMENT
The pursuit of higher education for many first time and continuing college students can involve financial challenges and important decisions regarding loans. Financial literacy provides learning opportunities on the importance of financial planning, managing your money, and understanding debt. Financial literacy is a lifelong skill and it is particularly important for college students who will have more financial choices and opportunities than any generation before. Students must be aware of their rights and their responsibilities as students and consumers. Financial literacy can include budgeting, balancing a checkbook, the pros and cons of obtaining and using credit cards and saving for the future. Mount Aloysius College knows that being able to successfully manage your money will help to ensure your success as a student.
TIPS ON MANAGING YOUR FINANCES
Taking out student loans can be intimidating and have a huge impact on your life if you’re not careful about how much you’re borrowing. The best recommendations we can give you are to be aware, informed and manage your loans responsibly. These tips will help you throughout your time at college and beyond.
Monitor your debt
It is imperative to your financial health to consistently monitor your loan indebtedness while in school so you have a realistic understanding of your financial obligations once you are out of school. Remember, these are your loans and you’ll be expected to repay them. We suggest you check your federal loan history on National Student Loan Data System (NSLDS). The website: NSLDS.ed.gov is a great place to bookmark so that you can easily review your federal loan history. If you’ve borrowed private loans, they won’t show up on this website so you should keep track of those loans by bookmarking the site of the lender you used or by keeping your award letters from each year that should reflect those loans.
Each year before you consider borrowing a loan, you should first seek ways to minimize your school related costs. Things like your living expenses, books and supplies, transportation, etc. Always take advantage of all sources of financial assistance making sure to file your Free Application for Federal Student Aid (FAFSA) early. Be proactive in looking for outside grants and scholarships and, if borrowing is still needed, start with the Federal Direct Loans. The Direct PLUS or Direct Graduate PLUS loans and Private Alternative Loans can also be used to help cover the cost of attendance if additional funding is needed. Think of other ways to pay for tuition rather than taking a loan. Consider a part-time job or inquiring about the Federal Work-Study Program.
Avoid or limit credit cards
Credit cards are tempting and should be used responsibly. Credit cards make it easy to purchase items on impulse that you might not normally be able to afford. Remember that a poor credit history will jeopardize your ability to secure a mortgage, a car loan, or other lines of credit in the future. So, consider using credit cards only for emergencies. If you get a credit card make sure you know your interest rate. Also, don’t put more on your credit card that you’re able to pay off each month. By doing so, you’ll avoid interest charges and accumulating more credit card debit.
Know your credit score
Lenders will use your credit information to determine if you’re worthy of borrowing and to determine what type of interest rate they will give you. It’s important for you to know your credit score. If you have a low credit rating, you will be facing higher interest rates on your loan which means as a borrower you will pay more interest in the long run. Obtain a copy of your credit report from one of the three major credit reporting bureaus (Experian, Equifax, and TransUnion). It will show your detailed history of your personal and financial information dating back 7 years or more. Think of it as a “financial report card.” In addition, you can obtain your credit score which is basically your overall credit grade. The better your grade, the better your credit and the more willing lenders will be to lend to you and a reasonable interest rate.
Know your student loan servicer
Loan servicers can be the original lender, a new lender who has purchased the loan from the original lender, or a third party. They have a variety of duties to ensure that the loans are administered in compliance with federal regulations and guarantee agency requirements. Some of these tasks include: disbursing loans funds, monitoring loans while the borrowers are in school, collecting payments, processing deferments and forbearances, responding to borrower inquiries, and maintaining loan records. The NSLDS website will keep track of your servicers so it another great reason to look at this site.
Understanding your loan terms and conditions of repayment
The first step to understanding the terms and conditions of repayment is to read and understand the Master Promissory Note (MPN) before you sign it. The MPN is a promissory note that can be used to make one or more loans for one or more academic years (up to 10 years). There are two types of MPNs in the Direct Loan Program: one for Direct Subsidized/Unsubsidized Loans and one for Direct PLUS Loans. If you’ve borrowed from a private lender, you should be sure to read the promissory note and any and all disclosures the lender sends you. Print or keep copies of any loan applications, promissory notes or disclosures for your records. Most importantly, you should know the interest rate on all of your loans whether they’re federal or private.
Make a budget
A budget is simply a spending plan that is based on your income and expenses. A budget is an important tool to keep you financially healthy while you are in school and after you graduate college. By having a written plan, you’ll stay on track and understand how to "live within your means." In order to create a realistic budget, you should first assess your current lifestyle and spending habits. Start by itemizing your basic monthly living expenses, such as: rent, utilities, food, clothing, laundry, transportation, entertainment, and so on. The next step is to itemize your financial resources, such as parental/family support, savings, full-time/ part-time work income, and so on. Now you should be able to compare your projected monthly expenses to your projected monthly income, thus assessing your need (if any) for student loans to bridge the difference. When taking into account your expenses, look closely to determine what items are a true necessity and those that are not. Remember, the goal of creating a budget, especially while you’re in college is to find ways to reduce the amount of loans you have to borrow. Trimming those expenses could help lower that amount.
Student Refunds – Be Wise
Some students get excited by the possibility of a student refund and think they’re getting back “free money”, but you need to look a little closer at your tuition account and financial aid award package. Remember, if you get a student refund during any semester that you’re a student it is almost always loan funds that you’re being refunded. Do you really need that refund? By taking that money you are just adding to your loan debt. Unless the money is truly needed, be wise and return the money back to the lender on your loans. It is to your advantage to reduce your loan debt every chance you get. If you choose to take that refund that is just more that you’ll be repaying back to your lender once you graduate or cease to be enrolled at least half time.
Check out these resources and links that can help you in managing your money: