ELFI wishes for the safety of all individuals in areas impacted by the natural disasters in the United States. If you've been affected, assistance may be available to you. Contact your loan servicer for more information.
AES: 1-866-763-6349 | MOHELA: 855-282-4269
×
TAGS
For College
Personal Finance

10 Ways College Students Waste Money

October 6, 2019

In college, you don’t have much disposable income, so you must find ways to reduce your outgoing expenses. While it’s easy to pretend that your financial decisions don’t count until after you finish college, being smart with your money in college will save you thousands. Here are ten common ways that college students waste money.

 

1. Eating out too often.

Spending $5, $10, or $15 for each meal starts to add up pretty quickly. While fast food and takeout present themselves as reasonably convenient options, they truly aren’t worth the money (or your health). We know it may seem like a hassle to cook your own meals, and sometimes your campus dining hall might not be the most appealing (if you have a meal plan), but choosing these options could save you hundreds each month. 

2. Buying new textbooks.

New textbooks cost significantly more than used textbooks. If your campus bookstore doesn’t have a used copy, take the time to look for it online. You could also share a book with a friend or borrow one from someone who’s already taken the class. You could even download a digital copy. This will save you significant money over the semesters.

 

3. Not using campus resources.

Beyond the cost of tuition, colleges often have fees you must pay for specific services on campus. These include fees for health services, the campus center, technology, fitness center, etc. These services are meant to support the academic environment and provide value to you. Take advantage of these services that you’re already paying for. Use the health services when you are sick, use the campus fitness center instead of buying a gym membership, and get your computer fixed on campus if they provide services. 

 

4. Skipping classes.

If you divide the cost of your tuition per semester by the number of classes you attend, you’ll likely be surprised at how much you are paying per class. Take advantage of the money you’re spending by attending class and getting the knowledge you went to school for. 

 

5. Withdrawing from classes after the drop date.

If you’re going to drop a class, make sure you do it before the drop deadline. This is typically about two weeks after the start date of the course. Dropping a class after the drop deadline means that you’ll be forfeitting that portion of your tuition. 

 

6. Failing classes.

One of the most costly mistakes that college students make is failing classes. Make sure you study up and don’t miss your lectures. If the course that you fail is required for your major, then you’ll have to pay for the class twice. If you foresee difficulty in a class, make sure you find a study group, tutor, or friend that can help you get through it with a passing grade. 

 

7. Overdecorating.

You obviously want your home away from home to be cozy, but don’t go overboard here. There are plenty of cheap decor superstores around that can bring your dorm to life. Consider setting a tight budget for your dorm decor before you start decorating.

 

8. Using credit cards.

Since you typically don’t have a ton of bills in college, don’t use a credit card for anything other than emergencies. Some studies have shown that college students with credit cards rack up $3,000 to $5,000 in credit card debt by the time they graduate. Get in the habit of using a debit card or cash only. Here are some more tips for avoiding credit card debt

 

9. Visiting expensive spring break destinations.

While a spring break in Panama City Beach is on many college students’ bucket lists, it’s really not necessary. Consider taking a trip to visit a friend’s hometown, going on a camping trip, or even going home to visit your family. Once you graduate and have a full-time job, you’ll have plenty more opportunities to visit tropical destinations. 

 

10. Missing out on student deals.

Whenever you’re about to buy something, remember to break out your student ID! Many companies offer exclusive benefits to college students, generally in the form of discounts. Finding out where these deals are could save you a decent amount of money while in school (and possibly after school too). For online services (such as Apple Music and Spotify), you may be able to use your student email address to earn a discount. 

 

While college days can be seen as a time to be care-free, the financial decisions you make now, as well as the habits you build, will affect your life after college. Be sure that you’re doing all you can to save money in college. Your bank accounts (and your parents) will thank you. 

 


 

Note: Links to other websites are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site. SouthEast Bank does not control the content of these sites.

Leave a Reply

Your email address will not be published. Required fields are marked *

paying down student loans with a credit card
2020-10-27
Should I Pay Down Credit Card or Student Loan Debt?

Dealing with student loans can be incredibly challenging for many college graduates. According to Experian, Americans carry an average student loan balance of $35,359. On top of that, the average credit card debt is nearly $6,200, says the credit reporting agency.    In most cases, targeting one debt at a time can help you pay off your balances faster and save you more money on interest. So should you pay down credit card or student loan debt first?   Here’s how to develop your strategy:  

Should You Pay Off a Credit Card or Student Loan First?

In the vast majority of cases, it’s better to prioritize your credit card debt before your student loan debt. This is primarily because credit cards charge higher interest rates than student loans.    Additionally, credit cards don’t have set repayment schedules, so it’s easy to add to your balance even while you’re paying them off. As a result, credit cards may keep you in debt for longer than student loans with firm repayment terms.   For example, let’s say you have the following debts:  
  • A credit card balance of $7,000 on an account with a 20% annual percentage rate (APR) and a $120 monthly payment.
  • Combined student loans worth $30,000 with a weighted-average rate of 6.5% and a $341 monthly payment. 
  In total, your minimum monthly payment would be $461, and if you were to pay just that amount and add no new debt to your credit card, you’d pay off the student loans in 10 years and the credit card in a little more than 11 years. You’d also pay a total of $24,739 in interest over that time.   Now, let’s say you could afford to put $510 toward your debt every month. If you were to add the extra payment toward your credit card debt until it was paid down, your balance would be paid off in a little under six years. Then if you use the total amount you were putting toward your card toward your student loans, you’d pay those off about a year and a half early. You’d also save $9,643 in interest.   If you were to do the opposite and focus on your student loans first, you’d pay those off sooner, but the higher interest rate on your credit cards will result in more total interest charges.    You can use a debt avalanche calculator to find out what you could save with your specific situation.  

Can You Pay Off Student Loans with a Credit Card?

Another thing you may be wondering is, can you transfer student loans to a credit card? The U.S. Department of the Treasury doesn’t allow federal student loan servicers to accept credit cards as a payment method, and it’s unlikely you’ll find a private lender that offers it as an option.   But you still can technically use a credit card to pay off a student loan by using the balance transfer feature. 

Many credit card issuers send out blank balance transfer checks that you can use to pay off other credit card accounts or other types of debt. These checks often include an introductory 0% APR promotion, which could potentially save you money as you pay down your balance.   To use one to pay off student loans, you’d write the check out to your loan servicer and submit it as payment or write the check to yourself and deposit it into your checking account, then make a payment.   But just because it’s possible to do this doesn’t mean it’s a good idea. In fact, you’ll be hard-pressed to find a scenario where using a credit card balance transfer to pay off a student loan is the right move. Here’s why:  
  • Balance transfers come with fees, which can range up to 5% of the transfer amount.
  • If you don’t pay off the balance before the promotional period ends, you’ll be stuck paying a higher interest rate, which can be in the mid teens or even upwards of 20%, on the remaining balance. 
  • The lack of a set repayment term on a credit card can make it more difficult to stick to your repayment plan and keep you in debt longer. 
  In other words, if you have credit card debt, using a balance transfer credit card to pay it off interest-free is generally a good idea. But it’s not worth doing the same thing with your student loan balance.   If you have a cash-back rewards credit card, you can also opt to use your rewards to help pay down your student loans.   

Using Your Credit Cards Wisely While You Have Student Loan Debt

In an ideal world, you’d never carry a balance on a credit card because when you pay your bill in full every month, you’ll avoid interest charges. But if your financial situation is tight because of student loan debt and other obligations, it can be difficult to avoid.    Whether or not you can afford to avoid credit card debt right now, here are some tips to help you limit your exposure to the risks they present:  

Always pay on time

Even if you can just make the minimum monthly payment, paying on time will ensure that you don’t get slapped with late fees and a ding to your credit score. If you do miss a payment, make sure to get caught up quickly — you won’t avoid a late fee but late payments aren’t reported to the credit bureaus until they’re past due by 30 days.  

Try to avoid a high balance

Your credit utilization rate is the percentage of available credit you’re using at a given time. So if you have a $1,000 balance on a card with a $2,000 credit limit, your utilization rate is 50%. There’s no hard-and-fast rule for what your rate should be, but the higher it is, the more damage it will do to your credit score. So if you can, try to keep your balance as low as possible relative to your credit limit.  

Seek lower interest rates

As you work to pay down credit card debt, a balance transfer card with a 0% APR promotion can be a great way to save money on interest charges, even if you can’t pay the balance in full before the promotional period ends. If you can’t qualify for a balance transfer card, you may try to call your card issuer and see if you can get a reduced interest rate. There’s no guarantee your request will be granted, but credit card companies will sometimes offer a lower rate for at least a short period.  

Avoid using your card as you pay it off

If you keep adding charges to your credit card while you’re paying down the balance, it can feel like you’re taking two steps forward and one step back. If you can, try to stick to using cash or your debit card while you pay down your debt — at least for most of your expenses — to make it easier to achieve your goal.   As you take these steps, you’ll be able to avoid some of the drawbacks that come with using credit cards regularly. They’ll not only help preserve your credit score but also make it easier to pay off your balance, so you can turn your focus to your student loans.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
Happy couple admiring their home
2020-10-22
Should I Build Home Equity or Pay Down Student Loans?

Owning a home is a goal for many people. In fact, 40% of young millennials are saving to buy a home. If you already own a home, congratulations on achieving your goal! If you are now faced with a mortgage and student loans, you may wonder which debt you should prioritize. Should you build home equity or pay down your student loans?    Here we will explain what home equity is, how to build it and when it’s better to focus on home equity or paying down student loans.   

What is Home Equity?

When you pay on a mortgage, even if you haven’t yet paid it off completely, you’re building equity in your home. Home equity is the difference between the market value of the house and what you owe. Here’s an example of how to calculate it:  

How to Calculate Home Equity

  You can calculate your home equity by subtracting the balance of your mortgage from the current value of your home. The value of your home is determined by the fair market value of your house or the appraised value. This number is the true value of your asset (your house) since it takes into account the amount you owe on the loan.    Your home equity is calculated in your net worth. You may have heard that home equity can be “tapped into.” This means you can borrow against the equity of your home and use the money in a variety of ways. A home equity loan can cover home renovations or pay off higher-interest debt.    Your home is valued at $375,000 and your mortgage balance is $275,000. You determine the equity by taking the value of $375,000 and subtracting the mortgage balance of $275,000. The equity in your home is $100,000.   

Home Equity and the Housing Market

  Your home’s equity often increases when you make mortgage payments, especially when paying down the principal on your loan. Your home’s equity can also increase when its value rises. Although the value is determined primarily by the housing market, you can raise the value through home improvements.   Just as the value of your home can increase based on the market, however, it can also decrease based on the market. The only sure way to increase your home equity is by paying down your mortgage loan. The more of the loan you pay off, the more your equity increases.  

Building Home Equity vs. Paying Down Student Loans

  If you follow the normal payment schedule, you’ll increase your home equity slowly. If you make extra payments towards your mortgage, you can build equity faster. However, if you also have student loans, should you build home equity or pay down your student loans instead? Let’s take a look at some factors that can help determine the best course of action:   

Interest Rates

If either your mortgage or any student loan has a variable interest rate, you may want to focus on that loan first, because you are at risk that the rate can rise and leave you with a higher payment to make. In addition, if one of your loans has a much higher interest rate than the other, you may choose to focus on it first.  

Security

With student loans, in certain instances, if you are facing financial hardships you can temporarily suspend payments. Mortgages offer less flexibility with payments, therefore missing payments can result in foreclosure and losing your home.  

Loan Balances

If you have student loans with lower balances than your mortgage, you may be able to pay them off more quickly. Then, you can continue to build equity after paying down your student loan debt.   

Tax Implications

You may get a bigger tax break by building equity versus paying off student loans. However, this doesn’t apply to everyone. Interest paid on student loans is deductible, however, there is a cap on how much. As of 2020 the cap is $2,500. Your income must meet the requirements to be able to deduct this amount.    Interest paid on mortgages is also deductible, but only if you itemize your deductions. The mortgage interest deduction can be much higher than $2,500. To learn more about either of these options, consult with your tax advisor.  

Refinancing Your Student Loans With ELFI

If you don’t want to choose between building equity or paying off your student loans, then consider refinancing your student loans with ELFI. Use our student loan refinance calculator* to see how much you may be able to save.   

The Bottom Line 

Each person’s financial goals and situation are unique, so you have to make the best decision for you. Hopefully, however, knowing more about both options and which is better in certain circumstances will help you make an informed decision.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.   *Subject to credit approval. Terms and conditions apply.
Man feeling overwhelmed by student loans
2020-10-15
What to do When Your Student Loan Payment is Overwhelming   

Having student loans is not unusual. In fact, 45 million people have them. It’s also incredibly common to feel overwhelmed by your student loan payments.   A survey of student loan borrowers found that almost 65% of respondents said they lose sleep because of the stress caused by their loans. If you find yourself overwhelmed by your monthly student loan payment, there are some options you should consider to lessen the burden.   Before you can explore alternatives, however, you need to know the types of loans you have. Certain options are only available for federal loans as opposed to private loans. Check the Federal Student Aid website to determine any federal loans you may have, and request your free credit report to see any private loans. Once you’re familiar with your loans, you can consider new courses of action.  

Create a Budget

If you don’t already have a budget, create one! This will allow you to see if you can afford your current student loan payment. It will also show you areas where you’re spending unnecessarily. If you find there just isn’t enough income to cover all your necessary expenses, then you can begin working on different ways to reduce your student loan payment.  

Research Different Payment Plans

If your federal student loan payment is overwhelming, consider switching to a different payment plan. When you initially begin repayment, your loans are automatically put on the standard repayment plan. On this plan, your payments are based on a ten-year repayment term.   A Direct Consolidation Loan can help you change your payment plan to help make your payment more affordable. It can also help consolidate multiple federal loans into one loan. (Note: Consolidating your federal loans is different from student loan refinancing, discussed below.)   This will help you qualify for certain longer repayment plans, resulting in a lower monthly payment. One of the drawbacks of extending your payment term is you will end up paying more in interest costs over time.  

Income-Driven Student Loan Repayment

Certain loans are eligible for income-driven repayment plans. They can help make your payments more affordable and are based on your income and family size.  

Graduated Student Loan Repayment

If an income-driven repayment plan does not work for you, you can change to a graduated repayment plan. Your payment will begin low and increase over time for a ten-year term.  

Extended Student Loan Repayment

Another option is an extended repayment plan. To qualify, you must have certain loans over at least $30,000. Your payment may be fixed or may increase over time for a 25-year term.  

Look Into Refinancing

If you have overwhelming private or federal student loan payments, consider student loan refinancing. Refinancing may lower your interest rate and reduce your monthly payment. This is a good option even if your current payment fits your budget.   Refinancing can help lower your monthly payment, and can also save you thousands of dollars in interest over the life of the loan. Refinancing means obtaining a private loan to pay off your existing student loan or multiple loans.   Student loan refinancing differs from consolidation, which is only for federal student loans and may not necessarily reduce your interest rate. You can refinance private or federal loans, or both, and can also change your student loan repayment term to better fit your needs.   Here is an example of how refinancing can save you money:   If you have $65,000 of student loans with a 6% interest rate and have 10 years remaining on your loans, you will pay approximately $722 per month. If you refinance and qualify for a lower interest of 3.61%, your monthly payment would be reduced to approximately $646 per month. This equals savings $76 per month in savings. You will also save more than $9,000 in interest over the life of the loan.   To see how much you could save, try ELFI’s Student Loan Refinance Calculator.*  

Increase Your Income

Of course, increasing your income is easier said than done. If your student loans payments are becoming overwhelming, however, it may be a necessary step. Increasing your income through overtime hours or a side hustle can make your payments more manageable. A side hustle can be as easy as babysitting or dog walking, or more involved like starting a side business based on a passion.   If you haven’t begun repayment on your loans, but know you will face a significant loan payment after graduation, consider these steps:  

Build a Budget Early

Start a budget before repayment begins that includes your future student loan payment. This will allow you to see if you will be able to comfortably afford your payment. It will also help you build an emergency fund and a strong financial foundation.  

Seek Employer Student Loan Benefits

Look for an employer that offers student loan assistance. The number of companies that are offering student loan benefits is increasing, although the benefit is still rare. Some offer monthly benefits that can help you pay your loans off faster. Others offer a yearly benefit amount for a certain number of years. Either way, extra money from an employer to help pay loans will help you reduce your loan amount faster.  

Work Toward Public Service Loan Forgiveness

Apply for employment that may qualify for forgiveness. If you have federal loans, certain employment can qualify for forgiveness under the Public Service Loan Forgiveness program. Certain loans and types of employment are required so be sure to pay close attention to the requirements.  

Bottom Line

If you have an overwhelming student loan payment, explore your options to reduce your payment while furthering your debt-free journey.  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no­­­ control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.