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How to Properly Prepare For Student Loans

September 10th, 2013 by in Finance with 288 Views

Your child maybe a college freshman headed off to school, then your to do list is packed with shopping, gathering textbooks, and picking up on rooms.  While picking out the perfect dorm décor is important for your child, don’t assume to not advise the child on the other side of things, that is, on matters touching personal finance. This is the time to also talk to your child about personal finance. As the student’s parent, one of your obligations at this time is to prep your freshman on budgeting and smart spending strategies before he or she lands on campus.

Some college students are disinterested at the idea of making a budget. Knowing how to manage money is very important in running of a student’s daily college activities. Whether a student is using financial aid, paying his or her way own way, or receiving a parent’s help, college is an expensive affair that becomes more expensive with poor spending practices. One of the responsibilities of a parent at this time is to pass on a few words of wisdom on matters touching spending so as to give his or her child the tools needed to start college on the right financial footing.

Create a budget

A high school student may spend carefree whatever is in his or her bank account, live off his or her parent’s generosity or the spoils of a part-time job. When the student moves on to college, budget becomes crucial. It is therefore important you sit down together with your college child to look at finances. Map out your child’s streams of income, including money you are going to provide, income from student loans, grants, and other kinds of financial aid. Show your child, a college freshman, how to prioritize expenses so he or she knows how to save and manage money better.

The trick with a budget is to stick to it. Go over the budget with your child and talk to him or her about how to make smart money choices that fall within the budget. If your child loves to spend money on cappuccinos or the latest designer clothes, talk to him or her about buying clothes from discount retailers. You may be tempted to take over your child’s finances, but let him or her lead since the time has come for your college student to manage a budget and the best way to do so is for him or her to taste the waters.

 Spend on the right thing

A student should not use financial aid to fund social gatherings on his or her room. The financial aid is debt, so it must be used wisely. Even if it looks like “free money” now, it will come back to bite you, if you waste it. Student financial aid is meant to be used on things like tuition, books, and food plans but not on new clothes, social outings and such like things.

Only borrow what is required

If your child take out a student loan, remind him or her that the amount borrowed should be commensurate with the type of salary available once a certificate is obtained. Money borrowed for school should be for school. Avoid taking out more cash to fund an extravagant college life. Living frugally now while in college will help you not to pay interest on things like a bigger dorm room or fraternity fees later.

  • Michael Flash

    What student is this responsible?

  • Jessica

    I think this is aimed towards the parents to help guide their children.

  • Kristen Trott

    Many people need to read this article before taking out student loans. Unfortunately in this generation, a college and probably graduate degree is needed and colleges just get more and more expensive. One thing to remember is this money is not for free!!! Too many times I see kids using their student loan money to buy a new car or TV or computer. Only take out what is needed and find a job to help with the rest.

  • Sakil Hossen

    This article is worth reading. Very educative and about students loans quite important piece of suggestions shared. Thanks for this demonstration.

  • MD Golam Rabbani

    I personally think student loan is very bad for a student. It’s better if you can go without loan. There are many legal ways to earn money. I would recommend them to work hard but don’t take loan.