Children First: Students must plan early for student loan burden - KOTA Territory News

Children First: Students must plan early for student loan burden

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With the down economy, rising cost of living, and a tough job market, many students are pursuing a higher education in hopes of one day landing a well paying job.

But paying for that education is a big burden, not only in college, but after graduation. Repaying student loans is becoming a bigger challenge for some college students, making it even more important to learn financial responsibility at a young age.

"I know I'm going to owe money no matter what," says Nursing Student Trevor Richardson.

For many students loans are a big part of going to college.  "They need to plan right away that that's going to be part of the bills they have to pay every month," says David Martin, Financial Aid Director with South Dakota School of Mines. He also says they provide entrance loan counseling, which teaches students their responsibilities as borrowers. "Part of that counseling is encouraging students to not borrow anything more than what they need and they have to figure out, how best they can manage that so it doesn't become overwhelming."

It's overwhelming if students don't take into account everything they have to pay.

"I'm not only going to have my loan payments, I'm going to have rent, pay for food, groceries," says Richardson.

"Maybe looking at your first house, starting a family, suddenly that really good income begins to get whittled down pretty quickly and how is a student loan payment going to fit into that?" stresses Martin.

Martin says the average student leaves the SD School of Mines with $25,000 in federal student loan debt. "Maybe they don't have a lot of help, and they have to look at alternative loan programs, looking at that in addition to their federal that monthly payment is going to be creeping up and up and up."

"I don't know how long it will take to find a job when I graduate, I don't know how much money I'll make from that job once I graduate, I will have about twenty thousand in student loans, it's a pretty penny to have to cough up on loans. So it helps to be prepared," says Richardson.

Martin says that students are also required to take an exit loan counseling when they graduate, which again explains their responsibilities on repayment to them.

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Here are some tips courtesy of Bill Hardekopf, CEO of LowCards.com. A web site to assist students with becoming financially stable, and comparing credit cards, explaining options.

* Make a budget and put every dollar in place. Start with your net income--your income once taxes, healthcare, and retirement are taken out. Don't underestimate expenses. Track your spending for a month or two to get an accurate understanding of your expenses and where your money goes.

* Start saving immediately from every paycheck, even if it is only a small
amount. Open a retirement account at work or your own IRA. Time and
compounding interest will help your small amount grow into significant
savings by retirement.

* Open a separate savings account to save for an emergency fund. The goal
should be three months of income. If you lose your job or have sudden,
unexpected expenses, your emergency fund--not your credit card--should be
your safety net. Using loans to pay for an emergency simply adds to the cost
of the emergency.

* Pay every one of your bills on time. Late payments are often responsible
for a significant drop in your credit score.

* Set a payment schedule. If you are not disciplined in paying bills, it is
easy to misplace a bill or pay it late. This can be punished by late fees
and lower credit scores. The easiest way for young people to pay bills
is to do so online with scheduled reminders for payments.

* Pay off your credit card debt as soon as possible. If you are carrying a
balance on your card, do not put any new purchases on your credit card.
If you can't pay for it with cash, you can't afford it, so don't buy it.

* Monitor your credit history with free annual credits reports through
annualcreditreport.com. You can get a free credit report from each of
the three credit agencies (Equifax, TransUnion, and Experian) every year.

* Credit scores replace test scores, and you need to work hard to build
a good credit score. Lenders use this credit score to help determine how
likely you are to pay a loan when it is due. It is their way of planning for
the risk they take when giving you a loan. The higher your score, the
lower your perceived risk of default and the lower your interest rate.
Your credit score is used for all types of loans--credit card, mortgage,
auto--but also could be used by an insurance companies, landlord or
potential employer.

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