*OneMain does not make student loans.
College is the first time many people live on their own and manage their own budget. Unfortunately, some college students develop bad money habits early on.
If you know a young person who is in college or about to enter, forward them this article as soon as you’re done reading. If you’re a student yourself, take notes! Here are the most common financial mistakes college students make:
#1. Not creating a budget
Not making a monthly budget is probably the biggest mistake college students make. Things like using a cash evelope for spending money and building an emergency fund might sound mundane, but they really can make a difference. There are also many helpful tools like our budget calculator and other online resources which can help you better manage your money.
Following a budget is the foundation that good financial health is built on. It's relatively simple to avoid going over budget. It just takes discipline.
#2. Credit card abuse
Credit card abuse is one of the more serious problems college students can get caught up in. A student who has never had access to credit before might see it as “free money” and start spending too much on drinks, meals, transportation, etc. (Don’t forget pricey spring break trips!)
This might all make for some great memories, but if the student is unable to pay off their balance, it won’t do wonders for their credit score and financial future. Some students end up wrecking their credit before they even graduate. That’s no way to start off life as a working adult.
If a student is going to have a credit card, one with a low credit limit is a good idea so they can’t overspend too much. This will also give them an opportunity to get in the habit of making their payments on time and build good credit for the future. Just remind them to always stay under their credit limit.
#3. Not finishing classes/picking the wrong classes
This may not seem like a big deal, but it could make college more expensive. Here’s why:
If a student wants to drop a class, he or she can usually do it before a certain deadline and receive a refund for the class. But if they miss it, they’ll still have to pay, even if they withdraw later on. That’s money down the drain.
Then there is the question of lost time. Students who don’t pick classes strategically or don’t finish them on time (or at all) may need to rush to complete required classes later on. In some cases, they may not be able to graduate on time. If this happens, that’s at least one more semester they’ll be paying for school! Lost time = lost money.
#4. Paying too much for food
This is a huge opportunity to save money. Most college students have a meal plan, so there is no need to be ordering delivery and eating in restaurants all the time.
Students living in apartments with kitchens can buy their own groceries and cook their own food. They can save even more by getting a smaller meal plan or not buying one at all.
What about students who commute to school? If they pack their own lunch and bring it with them to school, they can save a ton as well!
#5. Not applying for scholarships and college financial aid
This is a no-brainer. Filling out the Free Application for Federal Student Aid (FAFSA) form should be a priority for kids about to attend college. Likewise, they should apply for every scholarship offered by schools and private entities they might possibly have a chance of qualifying for.
Each year both scholarships and billions in federal Pell Grant money for college go unclaimed.1 Don’t leave that money sitting on the table.
Additional Money Tips for College Students
- Look for good deals on textbooks. Used textbooks can be found in the campus bookstore or online, potentially saving you hundreds of dollars.
- Buy in bulk to save money and reduce trips to the store. You can even split it with roommates.
- Buy basic items at dollar stores whenever possible.
- Look for a good deal on housing and transportation. Research whether living on or off campus is cheaper, and look into whatever public transportation options are available.
- Consider getting a part-time job on campus. College jobs generally don’t pay a lot, but it’s a good way to start earning some income and managing cash flow.
- Look for paid internships. Get real working experience and a little spending money along the way.
Parents: Have a conversation with your child about managing money before they leave for school. If they start off on the right track now, they can avoid these potential financial issues and look forward to a bright future.