Leave College with your Pants on
College is expensive. And we're not talking the obvious costs ‚ tuition, room and board, books ‚ but the extras. From the tearful moment they unpack the family SUV freshman year until the joyous moment when they receive their diploma four years later a fistful of dollars are going to be spent. And likely it's a fistful of unbudgeted dollars.
The problem is that a few months after your child graduates the student loans come knocking. It's the chickens coming home to roost only if the chickens were carrying a large cadre of lawyers and bankers. Damn, chickens.
But the Stafford loans, Perkins loans or private student loans are expected costs. That those bills are coming due shouldn't be a surprise to anyone. The surprise costs are the four years of other debts. The lifestyle debts, the pizza debts; those are the debts that need controlling.
Here's an example of things to expect your dorm student to purchase:
- Off-campus food/beverage
- Off-campus entertainment (movies/concerts)
- Sporting Events
- Gas for car or gas for friend's car
- Room decorations/furnishings
- Laundry supplies
- Personal grooming ‚ Haircuts
These don't include items that have to do with going to school. These have to do with being social and are the same items your child spent money on while at home.
Children are born with an innate sense of not having an innate sense about money. They know it doesn't grow on trees but it may grow under a cabbage leaf. And they'll spend until they're told to stop. That's why students end up with so much credit debt. They have no money and take on a credit card. That card is maxed out so they go to another.
In a study done by the New Hampshire Higher Education Assistance Foundation as reported by the Boston Globe they found:
- Over 42% of students carried 6 credit cards or more.
- Seniors carried an average balance of $3,300
- 21% of freshmen were four months behind in payments.
- 46% of students and 55% of post-grad students were delinquent on credit card bills.
- And this did not count department store or gas cards, only straight credit cards.
- How can a student and parent stop the child from being swallowed by even more debt?
We have five (5) not so easy answers.
Working is King?
Work during the school year. Sounds like fun, right? Instead of doing keg stands before the big game you're schlepping pancakes at Denny's. This will do two things: it will put money in the student's pocket and it will keep the student at work while their friends are burning through credit cards like an insurance agent through close friends.
Working and going to school is tough but even 10 hours a week will balance out many entertainment ‚ pizza and beer ‚ costs.
Kids that work only during the summer should put most of that money away for use during the school year. If the money is budgeted correctly over the summer and the budget stuck to during the school year 400 hours of summer work would equal forty 10-hour work weeks during the school year. It's a pipe dream to think that the budget will hold all year but the longer it holds the less out-of‚pockets expenses parents need to pay and the less likely their child will be tempted by a credit card.
Parent-controlled Debit Cards
To keep the budget under control, parents can dole it out in weekly/monthly increments in an account accessed by a debit card. When the saved money runs out parents can keep the fun going by filling it themselves. Money grows on a parent's tree, right?
Parent-controlled Credit Card
Handing a credit card to a college-bound child is akin to handing a toddler a loaded gun. But if it's in a parent's name, where a parent will see how much, where and when the money's been spent, the child may be more careful what they put on that card. But the parent's have to ease their stranglehold and release a little rope. They can't argue every midnight pizza run or the child will hear the credit card's siren song a little clearer.
Parent-chaperoned Credit Card
This could work. Let the child have a card in his name but watch the bills. Have an agreed upon budget, making sure it gets paid off every summer and he reaps the credit benefits. The key here is the parents being resolute about watching the monthly bills. And then the parents must have enough power over the child to squash him/her like a bug if he/she steps over the line. Good luck with that.
Student loans are a necessary evil. Huge credit card bills don't have to be. With some forethought and discipline a child can leave school with little to no debt and have fun, too.
As an addendum: a good friend of mine thought their credit card balance limit was monthly. She was a National Honor Society student.