Reducing Your Debt

Please add one more very essential ingredient for successfully completing this semester (and your entire academic career)—your finances. The way you handle your money today can affect your future. It can be as important as staying on top of homework assignments. Get buried in debt and all your dreams can become secondary to your monthly payment. Prudent use of your financial resources every day of your educational experience will carry you successfully forward to graduation and beyond.

Your future is a series of choices

Every day you choose to go to class on time, choose to complete all the course assignments, and choose to pass the exams. Freedom of choice includes your finances. Some of you may be opening your first checking account, getting your first credit card, budgeting your own money for the first time and paying all your own bills. This can be tough while you are managing your academic needs, too. You can do it, though, by always choosing financial “survival” skills that include the following:

Money Management

Budgeting

Part of that money management freedom means that you keep track of the total amount of your student loans and the estimated payment you must make for that dollar amount. Keep all the documents related to your loans for future reference. Written information regarding approximate payment amounts is available in written form and on the web. Keep in mind the estimated salary of your chosen profession. Will you be making enough money to pay the monthly bills for the debt you have created?

Some of you are depending upon financial aid money or the financial support of your family. You may receive a large sum of money all at one time through the financial aid process, from a family member or some other source. It may be intended to last for months. Let’s say you receive $4,000 in aid for an entire semester. Please take a moment to think about how long you must rely on that money and what you may have to do without (food for instance) if you don’t spend it for your basic necessities. If the average cost for total expenses for a semester is approximately $4,000, you don’t have any room for unanticipated spending no matter how enticing the temptation.

Closely monitoring two things will help you prevent financial disaster: (1) how much money you earn or receive and (2) much you spend including payments for all your bills). Track both the money you receive and the money you spend. By doing this, you will have a clear idea of exactly where your money is going each month—and allows you to focus on places where you can cut back.

Ways to increase income and/or reduce expenses:

Use the university job search/placement services for a part-time job.

Apply for grants and scholarships using free scholarship searches.

Can you eliminate clubs, other memberships, newspapers, magazines and cable television?

Look for student discounts at stores and restaurants.

Is less expensive housing available? Is living at home an option? Get a roommate or become a resident advisor. Consider all the expenses of moving if you are considering leaving the residence hall.

Reduce grocery store purchases by reducing impulse buying - make a list. Use coupons only for things you would purchase anyway. Use your meal plan if you reside in the residence hall. Bag your lunch, if possible. Eating out is a big drain on your finances. Yes, make a list.

Purchasing your drinks at a grocery store in bulk is much cheaper than purchasing at a fast food restaurant. Do the math using the difference in drink cost times the number of days you normally purchase drinks – it can save you hundreds of dollars over a year.

Cycle or walk, don’t drive reducing transportation costs.

Can you “trade down” your present car, for one that has lower monthly payments and will cost less to insure and operate? Reduce your trips?

Review telephone service costs. If you have a cell phone and want to keep it, maybe you can hold off getting regular telephone service in your room or apartment. Call long distance at night or on weekends. Communicate by e-mail.

Can you substitute low cost alternatives to most or all costly leisure activities?

Seek out free cultural events on and off campus.

Take some units in the summer so you can reduce the overall time in school and reduce the length of time you must borrow. Buy used books and sell old books back.

Establish financial goals for yourself. Short-term goals are goals that you can realistically achieve in a short amount of time. Your short-term goal may be to complete your academic year without accumulating credit card debts while at the same time paying all academic costs. Staying out of long-term debt may be a short-term goal.

You will also want to establish long-term financial goals. One of these might be to save money for a vacation following graduation. If you are unwise with your finances—instead of a vacation—your long-term goal may be to pay off a high interest rate credit card. In that case, you will pay a lot of interest and fees for which you gain no financial benefit. The credit card company will derive the financial benefit.

One way to establish goals is to consider whether the purchase you desire is something you really need. Don’t try to maintain a lifestyle you can’t afford if it imperils your having money to stay in school. Failing to keep your needs in perspective could jeopardize your true goal of graduating from school and getting the job you really want.

We live in a credit society. and we are all affected by our “credit rating”. The things you want to have throughout life may be withheld from you at some point if you don’t guard your credit rating TODAY. Please don’t let your campus bills affect your credit rating. If you owe us money for any debt on campus, we are your creditor. All of your debts, including your student loans, affect your credit rating. Your credit rating will affect not only getting a house or a car—but also renting an apartment.

Establishing a checking account may be your first step toward establishing credit. It may be a good idea to open an account at a local financial institution. This can save you money in transaction fees and make your financial services more convenient. Keep an updated record of all of your transactions (especially those using your ATM card). This can save your paying overdraft fees. Financial service and account fees vary. Choose a bank with a good online banking system so that you can keep track daily. Be sure you read the fine print when selecting a financial institution. One of the first skills you should learn, if you don’t already know, is to balance your checkbook and do so every month. Most financial institutions have clear instructions on the back of your statements to help you reconcile your account step-by-step.

Do your best to have only one credit card. Read the fine print. You may find out that there are stipulations on the particular credit card you choose. For example, if you become past due on only one payment by a certain number of days, the credit card company may have the right to raise your interest rate many percentage rate points. Pay it off at the end of each month. If you don’t do so and you pay only the minimum payment, you may end up paying for many years and 2 – 3 times more in interest payments.

By sticking to minimum payments, it would take a student more than 12 years and $1,115 in interest to pay off a $1,000 bill on a card with an 18 percent annual rate. If you cannot afford to pay the whole bill, you must at least pay the minimum or your credit history will be tarnished.

Don’t take out a loan if another option is available to you. If you are going to take out loans, remember that the term “loan” means that it is a debt that must be repaid.

You don’t HAVE to accept all money offered to you in your financial aid package. You can decline loans. You simply need to decline on your offer letter or send a statement to the Financial Aid Office with your name, and social security number, indicating the type and amount of aid you wish to decline. To decline a loan, don’t return or the Master Promissory Note.

If you are eligible for the Federal Perkins Loan, take advantage of that money. It has only a 5% interest rate. However, it is a separate loan with a check sent to a separate address. Multiple loans make is easier to default through the negligence of updating your address in all the right places.

If you do have student loans, learn about all the options you have for repayment (payment plans, payment methods), deferment, and cancellation.

Remember you have the right to dispute charges if you believe they have been incorrectly applied to your account.

If you drop units after all of your aid funds have been disbursed, you may have received funds for which you were not entitled. If this is the case, you must repay the amount for which you were not entitled.

New Address?
Update your address immediately:
To prevent delinquent unpaid bills
Make the change at:
If prior to enrollment - The Admissions Office
If after registration - University Records - The Registrar's Office

Communication is the key to any relationship. As one of your creditors, it will be important that you contact us if you have not paid your bills on time here at Troy University! That will also include all outside creditors—credit card companies, banks (car loans, for instance), the utility companies (if you are maintaining your own residence), and any other entities to which you owe money. For information, call and/or write University Cashiers if you have current bills due.

Double check any payment plans with the University to be sure that your payment is going to zero out the account.

If you stay in communication, you can avoid having:
- Services withdrawn
- Credit bureau reporting
- Collection agency action
- Legal action taken against you.
Remember that mail sent to your family’s address may not be received in a timely manner by you and may create financial problems for you.

You can seek more information at:
www.credit.org
www.cardweb.com
www.bankrate.com
www.cardtrak.com
www.mastercard.com
www.visa.com
www.lowermybills.com