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Students

Establishing and maintaining good financial practices is important at any age. That said, it is of special importance for students, just beginning their careers and starting out on their own. The consequences of excessive debt and poor credit can be devastating, and follow you for a very long time.

Taking the proper steps now to minimize debt and start healthy financial practices will help establish your long-term financial footing and make sure you are primed to thrive wherever your career takes you. Use these resources and tips to get started.

Paying for College

For most students, the most pressing concern in their financial lives is how they will pay for college. According to The Smart Student Guide to Financial Aid, tuition rates increase at about twice the rate of general inflation on average, or about 8% per year. For a baby born today, that means college will cost approximately three times the current rate by the time the baby cracks her first college textbook.

While bending the college cost curve is an important long-term goal for policy makers to tackle, there are resources to help current and recently graduated students cope with the seemingly overwhelming cost of attending college. The Consumer Financial Protection Bureau has developed a terrific guide to available resources, including financial aid guides, financial aid comparison tools, and tips for repaying student debt.

Click here for more information.

Saving for College

Though college costs can be intimidating, by planning and saving early students and their families can help reduce the burden by leveraging the power of compounding. Money saved early will earn interest, and that interest will earn interest. The longer the money is saved, the more interest grows, and the more resources are available for college.

Generally speaking, experts recommend saving as much as you can, as early as you can, as often as you can. Making savings automatic through direct payroll deductions is one way to do so. Students and their families have a number of options for contributing to college savings. Some common choices are described below.

529 Savings Plans. A 529 college savings plan is an investment account that allows you to set aside money for education, and let it grow tax-free. These plans can be used by anyone, so long as the proceeds are used for education-related expenses. Most 529 plans are established through state governments, and while students are free to use any 529 they choose in most cases, Ohio’s plan is consistently rated as one of the nation’s best (and offers income tax benefits for Ohio residents).

Visit College Advantage for more information on starting and contributing to Ohio’s 529 plan.

Prepaid tuition plans. Prepaid tuition plans are investment accounts that let you pay for a child’s future college tuition (or a portion of it) at today’s prices. These plans are a variation of the 529 plans described above, and are administered by the same state-run agencies. Unlike other 529 plans, however, most prepaid tuition plans can only be redeemed at public colleges and universities where the plan is based, and are typically limited for that reason to state residents. Ohio’s prepaid tuition program – the Guaranteed Savings Fund – was closed to new enrollments in 2003, and is unlikely to be revived in the near future.

Coverdell Education Savings Accounts (or “ESAs”). ESAs operate much like Roth individual retirement accounts (or “Roth IRAs”) do. Contributions are limited to $2,000 per beneficiary per year, and while they are not tax-exempt, the earnings on those contributions grows tax-free. Contributions can only be made through a beneficiary’s 18th birthday (except for students with special needs). Withdrawals are tax-free, too – if used for a beneficiary’s qualified educational expenses.

U.S. Savings Bonds. Savings bonds are considered one of the safest, if slowest-growing, vehicles for college savings accounts. IRS regulations give bondholders the option of claiming interest annually, spreading the tax burden of accrued value out over time. When the bond is cashed in to pay for college, then, the taxes have been paid, reducing cost and providing income usable for college expenses.

Custodial accounts. Custodial accounts are savings accounts in a child’s name, controlled by a parent or other responsible party until the child reaches legal adulthood. Generally, custodial accounts offer fewer benefits than other vehicles, and may negatively impact a future student’s financial aid package by counting as a “personal” asset.

It is important to consider all factors in choosing your college savings plan, including potential tax benefits, which choices fit your financial circumstances and comfort level, and how each might impact financial aid offers. For more information on saving for college, including comparisons of the various choices available, visit FinAid or College Savings Plan Network (CSPN).

Student Banking

College is often the time when young adults first take control of their personal finances. For many, this also means it is the first time they have had access to – and control of – bank accounts. Banking relationships established in college can last a lifetime, and for that reason it is important to make sound choices at this critical point.

Generally, experts recommend choosing an account as soon as possible to avoid trying to juggle the options and your classroom obligations. Ideally, this should happen before you begin classes. You should shop around, and consider accounts that offer services like remote check deposits, mobile apps, and online bill pay. Also be sure to check out the fees banks charge for using the account – very rarely are accounts actually “free” or “easy,” though they are often advertised that way.

Once you have an account, sign up for direct deposit with your school. If you are expecting a financial aid refund, this is the fastest way to get access to your funds.

For more student-specific banking tips, visit the Consumer Financial Protection Bureau’s student banking page here.

Money Saving Tips for Students

In addition to tuition, room and board, attending college includes the cost of books, clothing, entertainment, and a host of other expenses. To help you make good choices, we have developed this list of tips we hope will help you spend your money wisely, and set you up to worry about your studies instead of your wallet.

Textbooks

For most college students, textbooks are the most expensive item not covered in some way by financial aid packages. When possible, you should seek to buy your textbooks used. In some courses, you may even be able to buy a slightly older edition of the same textbook at a steeply discounted rate – saving you even more.

When you are done using your textbooks, in most cases you can sell them back to the bookstore or online and recoup some of your initial investment. Traditionally, the return is not much – sometimes as little as 10% of the purchase price of a new book – but every little bit helps.

Many college and university book stores are now offering students the option of renting their textbooks. For a one-time fee, often much less than purchasing the book, students can use the book for the semester and then return it (provided the book is returned in good condition).

Students who plan ahead can also make use of public and university-owned libraries to search for textbooks. Many Ohio universities allow students to borrow books across campuses through a program called OhioLink. While you may not be able to keep the book for the entire semester, this approach does offer some savings in the short term.

Housing

In many cases, colleges and universities will offer discounted or even free housing to students who sign up to monitor residence halls as residence assistants. These programs also usually include teambuilding and leadership development training, and may help students find internships and jobs after college.

The most effective way to save on housing costs is to live at home. It may not be as exciting as living in a dorm, but if cost control is your goal, there are few better ways to achieve that than living with Mom and Dad.

Should you choose to live off-campus (and not with your parents), make sure that you consider all of the associated costs, including utilities, internet, your phone bill, food, and others before you sign your lease.

Shopping and Entertainment

In many communities located near college campuses, businesses offer discounts to students who present college IDs at checkout. This helps the businesses attract traffic, and saves you money.

Kent State University students can take advantage of discounts using their FLASHcards at many businesses, and in some cases even pay for purchases using prepaid accounts linked to the card. Students at Hiram College, NEOMED, and many other institutions can take advantages of discounts, as well, and should always feel comfortable asking vendors if discounts are available.

In addition to using student ID cards to find price breaks, students should seek to minimize costs wherever possible. Suggestions include thrift shopping, buying food and drinks in bulk, and spending time playing games at home rather than going to restaurants, movies, and other entertainment venues.

Colleges and universities often provide entertainment on their campuses for enrolled students at no cost. Check out university websites, campus posting boards, and other resources to see what’s happening on your campus.

These small steps can have a dramatic impact on your costs – and free up dollars for other priorities.

Other Tips

If you are flexible with your college choices, you may be able to save even more. Taking classes at a local community college, in some cases, can lead to much lower costs for your first two years. Contact your chosen four-year institution to make sure credits transfer. They can assist you by telling you how classes transfer, and provide academic advising for what classes you should consider taking at the community college. If you are careful to make sure your credits transfer to a four-year institution, the savings can be dramatic.

Some colleges also offer discounts for early payment of tuition, or lock in tuition rates for all four years. If your parents work for a local institution of higher education, in many cases tuition discounts are available.

By exploring ways to save before you attend college – and sticking to them – you can help to minimize the debt burden you will face after graduation.

Credit Cards on Campus

Recent studies indicate that 83% of undergraduates have at least one credit card, with an average balance of $2,327. For some students – as many as 6% – credit debt exceeds $7,000, and the rate of bankruptcies related to credit card debt among people age 25 and under has grown faster than in any other group. Certain student loans (including private loans and PLUS loans from the federal government) are credit-based, and a negative credit score resulting from misusing credit cards may even hinder a student’s ability to obtain the loans needed to finish college.

As with most choices, a little research and planning can go a long way toward ensuring that you don’t end up in an uncomfortable situation. Before committing to a credit card, do your homework and make sure you know what the interest rates are, how they’re calculated, and if they change over time. If you can, pay your credit card balance off every month to avoid interest charges, and pay on time to avoid late fees. If you have more than one credit card, pay down your cards with the highest interest rates first. After you have been a customer for some time, call the company and ask for a lower interest rate.

If used poorly, credit cards can cripple your credit, lead to bankruptcy, and make the dreams you hope to use your degree to pursue harder to attain. If used wisely, they can help you build a good credit history, and lead to lower interest rates on the big purchases – cars, houses, and businesses – that come after graduation.

Financial Aid

Every year, millions of students graduate from high school. A college education can be an important building block for future careers for those students, but often seems unattainable due to the high costs most people associate with higher education.

Fortunately, student aid is available from a number of sources. According to the U.S. Department of Education, 85% of college students now receive some form of financial assistance, a figure that continues to rise over time. Aid is available in the form of loans and grants from state and federal governments, scholarships from individual universities, civic foundations and community organizations, and many other sources. What follows is a brief description of available aid programs to get you started.

Federal Aid Programs.

The U.S. Department of Education awards around $33 billion each year to students attending post-secondary schools. To qualify, students must typically be attending an approved college and working toward a degree, and meet some academic standard of progress.

Pell Grants. Available for undergraduates only, these grants are need-based and do not require repayment after graduation.

Perkins Loans. Perkins loans, as the name implies, must be repaid after graduation, and are awarded based on need. These loans carry lower interest rates than other options, but are capped at $4,000 annually for undergraduates and $6,000 annually for graduate students.

Stafford Loans. Stafford loans are available to both graduate and undergraduate students. These loans come in two varieties: need-based subsidized (meaning interest is forgiven while you are in school and for 6 months after graduation) and unsubsidized (available to everyone, and interest compounds for the life of the full loan regardless of enrollment status). Subsidized Stafford loans are available only to students in undergraduate programs.

PLUS Loans. These loans are unsubsidized, and are typically made to parents of undergraduate students or directly to graduate students.

Work Study. Work study programs are subsidized by the government and provide students with aid in exchange for work, usually conducted on campus.

Ohio Aid Programs.

In addition to federal aid, many students in Ohio qualify for state-based financial assistance. These programs include:

Ohio Instructional Grant. Provides need-based tuition assistance to full-time undergraduate students from low- to moderate-income families.

Ohio Student Choice Grant Program. This program provides financial aid to full-time students at four-year, private, non-profit colleges and universities in Ohio.

Ohio Academic Scholarship Program. Competitive, merit-based financial assistance to Ohio high school graduates who enroll for full-time undergraduate study in Ohio colleges and universities.

Board of Regents Graduate/Professional Fellowship Program. Competitive, merit-based financial aid for Ohio college graduates who enroll at Ohio institutions for graduate studies.

Additional Resources

The above listing of federal and state aid programs is incomplete, and barely scratches the surface of the programs for grants and scholarships available. The following resources provide much more comprehensive listings, and are must visits for prospective college students and their families:

Portage County Colleges and Universities

Portage County is home to a number of institutions of higher education, catering to students with a wide variety of career and educational goals. Feel free to explore the programs they offer, and to contact them for additional information: