Budgeting in College: How You Can Adjust to Start Making Payments Towards Student Loans
BIG Ideas:
- Budgeting in college for student loan payments can help you prepare for repayment and get off to a strong financial start after graduation.
- Understanding your expected loan payment, income, and expenses can make budgeting for your student loans easier.
- Making your student loan payments on time will help you build a strong credit score and a brighter financial future.
You came to college on a mission: to learn new skills, meet new people, and, of course, walk away with that all-important degree. And given the cost of college, you’ve likely paid a lot for that opportunity, and may have student loans waiting to greet you after graduation (not exactly the gift you were hoping for!).
When you signed for them, those loans may have just seemed like numbers on a financial aid award letter. But as many graduates learn, college doesn’t last forever, and those loans will become very real sooner than you think.
There’s an easy way to prepare for those future payments even before graduation: budgeting in college. In fact, budgeting in college can make the transition from college to the real world a lot easier and a lot less stressful (always a good thing!).
Let’s take a look at what budgeting while in college involves:
- Knowing what your monthly payment will be. The more you know about your future student loan payments, the easier it will be to prepare for them. Understanding what you owe, what your monthly payments may be, your interest rates and loan types (fixed or variable), and when your loans enter repayment can help you plan ahead and build your budget. To learn the amount of your balances and interest rates, log on to your servicer’s or lender’s website. If you’re still in school and not yet making payments, you can use student loan calculators and repayment estimators to estimate what your payments will be after graduation.
- Calculating your net income. If you have a part-time job or Work-Study in college or work during your summer or other breaks, calculate how much money you will have each month. Remember your net income is your take-home, or net pay (after taxes), not the total amount you make (gross income).
- Calculating other expenses. Next, review all of your expenses, including your rent/housing, transportation, utilities, and groceries. Don’t forget automatic expenses like subscription services as well as expenses that aren’t monthly, like annual memberships.
- Start building your budget. Once you know your expenses and your income, you can start creating your budget. Fire up a spreadsheet or use a budgeting app to list all your income and expenses. You should also categorize those expenses into “wants” versus “needs.” Needs include essential expenses like those outlined above, while “wants” are just extras like streaming services, takeout, and entertainment expenses. Of course, your student loan payment should be part of your budget.
- Cutting expenses. If you have a budget shortfall, start by reducing your non-essential expenses. You can also look for ways to build your income, like starting a side hustle or getting a part-time job. Even small changes to your income or expenses can make a difference. For example, you can cut a few streaming services or reduce your takeout orders.
- Determining your future income. When you graduate, you’ll enter the real world, where you’ll hopefully find a permanent job. You can research starting salaries in your major on sites like College Scorecard from the U.S. Department of Education to get a sense of what you might earn.
- Figuring out your future housing situation. Are you planning to get your own apartment or move back home with your parents or other relatives after college? Knowing your housing plan now can help you prepare your budget, since housing is one of the biggest expenses you will have after college.
- Start saving early. If you get a job just out of college in your chosen field, or take another job in the interim, start setting aside money in your savings account, which you can use to start making your payments or build an emergency fund.
Why Budgeting While in College Matters
Again, budgeting while in college may not seem like fun, especially when you want to enjoy every bit of your time in college. It can, however, help you tremendously when you graduate and take on the most daunting course yet: Adulting 101. Here’s how it can help you:
- Avoid sticker shock. You’ll know exactly what you owe, so there won’t be any surprises. By building your budget now, you’ll be ready when those loans come due.
- Make informed choices. If you know what your student loan payments will be, you’ll be able to better decide on employment opportunities and future housing.
- Get the drive to start your career. Knowing student loan payments will come due after graduation could give you that extra motivation to start networking, exploring job opportunities, and preparing for your career.
- Build good credit. Budgeting for your student loans will help you make those payments, which are critical to building good credit and getting off to a great financial start when you enter the real world. Your history of making payments is one of the biggest components of your credit score. So, making your payments on time can help you build that score, which is integral in helping you get the future loans you may need and the best possible rates that can save you money.
- Reduce financial stress. Planning how to tackle your student loan debt can help you build financial confidence. Instead of worrying about how you’ll make your payments, you’ll know exactly where your money is going and what adjustments you may need to make. And if you’re considering getting your own apartment, having a good payment history on your credit report will show a prospective landlord that you are reliable.There’s another reason to pay your loans on time: it can help you avoid costly fees, which can really add up. That’s the last thing your budget needs.
Building Good Budgeting in College Habits Now Will Pay Off Later
Sure, budgeting in college may not sound as fun as hanging out with friends or attending concerts, but it is a necessary skill you’ll need for the rest of your life. It can help ensure you make your payments on time, build strong credit, and most importantly, build financial confidence and independence. Your future self will thank you!
Brazos Can Help Make Those Loans More Affordable
For more than 50 years, Brazos Higher Education has helped students finance the cost of college. As a Texas nonprofit, we offer competitive rates that can help make college possible and more affordable. Contact us today to learn more about your student loan options.
