Student Credit Card Debt Tops the List of Money Mistakes
In addition to student loans, the average undergraduate college student in 2004 had four credit cards and $2,169 in credit card debt. Final year students had the highest balances, at an average of $2,864. The average graduate student had $5,800 in credit card debt, according to Nellie Mae, the nation's largest maker of student loans. At interest rates of 15 to 18%, you may be paying off this credit card debt into your 30s and 40s. See Money and the College Student: Leave College Without Credit Card Debt and College Credit Crisis: Avoid Piling Up Debt in College.
College Student Mistake #2: Squandering Your Student Loan Money
Use your student loan money to finance your education, not your lifestyle. Tuition, room and board, and textbooks are smart ways to spend your student loan money. Eating out, buying CDs, clothes, going on spring break, or otherwise bankrolling your social life, are not. You'll be paying these loans off for ten to 20 years, so use the money wisely.
College Student Mistake #3: Ruining Your Credit Score
The way you handle your credit card debt will follow you for many years. If you max out your credit line, don't pay your bills on time, and collect credit cards like they were going out of style, you'll have a poor credit score after you graduate that will make it difficult to get an apartment, obtain a car loan, get a home loan, or even find a job. Learn how to handle credit cards responsibly, and then do so. See What You Need to Know About Your FICO Credit Score.
College Student Mistake #4: Not Budgeting
A budget is a planning tool that empowers you to handle your money smartly; it's not financial handcuffs. It helps you plan ahead by knowing how much money you have coming in and going out. It gives you the peace of mind of knowing you won't run out of money. Not having a budget is like sailing a boat in the fog without radar. See How To Set Up a Successful Budget, Budgeting: First Step in Financial Planning, and College Budget Worksheet.
College Student Mistake #5: Choosing a College That's Too Expensive
It's not that important where you spend your first two years in college. Attend a community college while getting your general education requirements out of the way, then transfer to the school of your choice for the courses in your major. What matters is where you graduate. You'll save tens of thousands of dollars, which you'll appreciate when you're trying to pay off your student loans after you graduate and find that money is stretched so thin that you're still dining on Ramen Noodles. In-state public universities are another much cheaper alternative than out of state schools or private schools.
The Bottom Line
Smart use of your money and your credit in college will enable you to spend the money you earn when you graduate on things you really want (a new car, a nice apartment or house, a great wardrobe, travel, or whatever) instead of all your disposable income going towards debt repayment.
