Do You Really Need a Student Loan or You Can Avoid It?

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Student loans are available to any student enrolled in an approved program, such as vocational upgrading, and college programs. Student loans have a lower interest rates and favorable repayment plans. Some accrue no interest until six months after course completion. This makes student loans better than other forms of credit such as credit cards and personal loans. As with any form of credit though, the over-riding principle is to avoid using credit at the beginning.

Through life, you should try to live within your means and even below your means. Living within your means is ensuring your monthly expenses do not exceed your monthly income; however, there are times when this is not possible. One such time is when you are a student when your ability to earn a living is taken up with classes and after school study. Even though you may need to use student loans to help you financially to complete your studies, every step to limit those debts should be considered.

The first step is to set a budget and look at ways of minimizing expenses. Some expenses are expected once per semester, others are monthly expenses and finally some expenses items are budgeted weekly. A budget for a semester of college might look like this:

Cost Item

Cost

Times to be paid

Total cost

Tuition

$3,000

1

$3,000

Texts, Supplies

$1,000

1

$1,000

Security Deposit

$600

1

$600

Rent

$600

4

$2400

Utilities

$100

4

$400

Internet

$50

4

$200

Car

$200

4

$800

Food

$100

18

$1800

Entertainment

$100

18

$1800

Clothing

$200

1

$200

In this example, your total anticipated expenses for a 4 month semester are $12,200. This is for a student living alone and who drives to school. Is there any place savings can be realized?

Living Expenses – Students, unless there is some compelling reason to live alone, should live with others to share the cost of rent, and utilities. By sharing the cost of security deposit, rent, utilities and internet, at least $1800 will be saved.

Car – Cars are expensive, not only is there gas and insurance but parking needs to be considered. The worst part about cars is the possibility of an unexpected and major repair bill or an accident. Most city transit lines offer student passes for a reasonable price. $600 could be saved by using the bus pass.

Groceries – Prepare your meals and snacks at home! There are many easy and tasty meals that can be prepared at home by even the most inexperienced cooks. Instead of paying a $10 for a burger at a fast food joint, use that $10 to prepare a casserole that will last a couple of meals. A bag of premixed muffin ingredients will cost $4 and make 12 muffins whereas a single muffin out may cost $2. These are two simple ways to save on food costs. Potential savings are $450.

Entertainment – In place of going out for drinks or coffee, invite friends to your apartment. Arrange for a pot luck dinner and board games for an evening. You can even have a bottle of wine for less than $50 per week. Potential savings is $900.

Now the budget for each semester looks like this:

 

Cost Item

Cost

Times to be paid

Total cost

Tuition

$3,000

1

$3,000

Texts, Supplies

$1,000

1

$1,000

Security Deposit

$300

1

$300

Rent

$300

4

$1200

Utilities

$50

4

$200

Internet

$25

4

$100

Bus Pass

$50

4

$200

Groceries

$75

18

$1350

Entertainment

$50

18

$900

Clothing

$200

1

$200

 

Now the total expenses are $8450, a savings of almost $4,000 just by making some lifestyle adjustments.

Now that expenses have been addressed, it is time to look at the income side of the budget. During school breaks, such as summer for college students, are you able to work full-time and save money for the coming school year. Knowing that $8,450 is needed for each term, and you attend school for two terms each year, a total of almost $17,000 is needed.

As a typical college student enrolled in a four year degree program, you have four months off in the summer. You might not be able to save $4,000 each month but you may be able to save $1,000 bringing your savings to $4,000. This leaves you $13,000 short.

Is it possible to find a part time job that fits into you schedule? Could you work a shift or two serving at a restaurant or packing groceries at the local food store? Working 8 to 16 hours per week may earn up to $160 per week or $640 per month. $640 per month for four months adds $2,560 for the term or about $5,000 for the school year. Now the shortfall is only $8,000 for the school year.

Without help from parents or grandparents, and without any bursaries or scholarships, you could face $8,000 per year shortfall and over four years, that would be $32,000 by the time you finish your degree.

Conclusion

If you were living alone and enrolled in a four year degree program, you could expect to pay a total of almost $100,000 for tuition and living expenses. By making some lifestyle changes and minimizing your expenses, by working full time in summer and part time during the school year, you will still be short $32,000 over the course of four years.

Will you need to use student loans? Without help from family, and without scholarships, the answer is yes. The key is to limit those loans are make a plan to repay it as quickly as possible once you have graduated.

Image source: SalFalko

4 COMMENTS

  1. LOVE this, C. So many times, people just assume you have to spend boatloads of money to get a degree, when that’s just not true. I am reminded of the guy who lived in his van for his entire college years in order to graduate debt free. It wasn’t necessarily fun, but he said it was worth it.

    • In Romania people still don’t need loans to complete college (prices are way, way lower though) so that’s why, probably, it’s easier for me to say that you can reduce costs a lot. However, it’s clearly doable and if you can think about the future, it’s totally worth it.

  2. I definitely used some student loans for my undergraduate education. I think they are an unfortunate reality for most students. But mitigating costs is the best way to reduce the dependence on those loans, as you noted. I was able to do so by working at a university for the final 2 years of my education.

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