Don’t Make My Mistakes, aka If I Could Turn Back Time

I saw a comment on another blog today that I think makes a good backdrop to write something on my own blog for parents of current or future college students, or the students themselves. Here, I will lay out how I would do college finance differently if I could.

1. No credit cards
I wish I had never gotten a credit card in college. It was by far the worst mistake of my entire college career. I definitely had the “well, I’ll put on my credit card and pay it off eventually” mentality. That eventually was almost 10 years in my case because every time I saw something I wanted, on to the credit card it went, no second thought, and I always paid the minimum. Bad, bad idea.

When might a credit card be okay
Credit cards aren’t necessarily the devil. We need credit to build up our scores so that we are credit worthy for when we decide to do a big purchase, I.e. a car or home. But, make sure you or your child has a low limit credit card (and don’t allow the credit card to increase the limit automatically) and make the student get into the habit of paying the balance in full monthly, not you parents, them. Teach them financial responsibility.

Another side note
You don’t need a credit card to build credit. Buying anything that requires a loan works too. Many car manufacturers have first time buyer programs that offer low APRs. Taking out a small student loan works as well.

2. Not using my loans for things other than school and housing
I’m definitely guilty of using my loans for more than tuition, books and a place to live. Again, I convinced myself it would be okay because I would eventually pay it back. See the mind set I had? It really has set me up for a long fight against my debt.

I should have calculated each semester how much I needed for tuition, books and housing then returned the rest. I would probably only have about 2/3 of the student loan debt that I have now. Make this a family activity if you’re a parent with a college student.

3. Get an internship
Strange, out of place advice, right? Here’s my thought process: it will increase the likelihood of a job right out of graduation and allow you to have better earning potential. Better earning potential= greater ease in repaying student debt.

4. Make paying back any debt post graduation your top priority
Pretty self explanatory. Don’t go out and buy a car or move into a luxury apartment straight out the gate. Take the aggressive stance toward student debt and make that your absolute top priority to kill right out of undergrad.

5. Pay off debt before grad school
If you decide to go to grad school, wait until you’ve paid off your undergrad student debt. I can’t think of any grad program you have to do right after undergrad. It’s nice to go straight to grad school right after undergrad, but you’re only accruing more debt if you sit on any undergrad debt while in grad school. You build interest on unsubsidized loans no matter what, kids. Just do yourself the favor and wait a few years.

Admittedly, I had very little student loan debt after undergrad as my parents paid for a vast majority of undergrad. But, I was irresponsible with credit, bought a car after I graduate (used, not new, but still) and didn’t plan properly for or during grad school. I wish I could go back in time and change it, but it is what it is and I’m at least taking responsibility now. And I can help save others from making the same mistakes.

Oh, and parents, you should start saving for your child’s education when they are born, not wait to worry about it until they are already there, no matter how little you make.


3 thoughts on “Don’t Make My Mistakes, aka If I Could Turn Back Time

  1. Nice! Each of my 2 Grandkids have a 529 in place and have had it for quite a few years now. I loved your mention of students doing an internship. I was chosen back in the 80’s when I was getting my 1st degree for an internship but I didn’t do it. Talk about kicking myself in the pants! I know my life would have turned out quite a bit different had I done it.

  2. Pingback: Before You Take Out a Student Loan… | Good-bye Debt (with less than 5 figures a year)!

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