Chapter 9: Financial Literacy

What is a chapter on personal finances doing in a book on student success? If you’re a new college student, you may not yet have money problems or issues—but most college students soon do. It doesn’t matter whether you’re a “traditional” college student enrolled in college just after high school or a “nontraditional” student returning to school.

College students are likely to confront money issues for several reasons:

• If you are living away from home for the first time, you may have less experience setting and sticking to a budget and handling money in general.
• Because you need more time for studying and other aspects of college life, you may have less time to work and make money.
• Even if you receive financial support from your family, your funds are not unlimited, and you’ll need to learn to live within a budget.
• You will have many new expenses including tuition and fees, room and board or housing and food bills, books and supplies, and so on.

Almost everyone eventually has money issues at college, and they can impact your academic success. Money problems are stressful and can keep you from concentrating on your studies. Spending too much may lead you to work more hours than you might otherwise, giving you less time to study. Or you might take fewer classes and thus spend more years in college than needed. Worse yet, money problems cause many students to drop out of college entirely.

But it doesn’t have to be this hard. Like other skills, financial skills can be learned, and they have lifelong value. This chapter will help you

• set financial goals
• learn how to spend less and manage a budget
• consider jobs and making money
• learn how to build credit and use it wisely
• determine how best to finance your college expenses

A great tool that has more information on all of the topics covered here is iGRAD, it is available to FIU students: https://fiu.igrad.com/ . Set up your profile and take the Financial Literacy Check-up to get an initial understanding of your current financial knowledge, then review the various courses iGRAD offers to brush up on any topics that are interesting to you.

As you identify your financial goals and priorities, you might consider the following guidelines: 

• Balance your income and expenses. List specific ways that you will reduce spending and increase income. If you have a family, consider posting this list for everyone to see. 
• Take charge of your credit. A good credit rating will serve you for a lifetime. With this asset, you’ll be able to borrow money any time you need it. You should not be scared of managing your credit, it is a skill that can developed over time and by educating yourself, just like any other skill.
• Avoid debt when possible. The surest way to manage debt is to avoid it altogether. If you do take out loans, borrow only the amount that you cannot get from other sources—scholarships, grants, employment, gifts from relatives, and personal savings. Predict what your income will be when the first loan payments are due and whether you’ll make enough money to manage continuing payments.
• Take a look at your income and expenses. This may not always be possible, but it’s great to aim to spend less than your total income and utilize some of these funds to work toward your financial goals. Try to strategize ways you can create multiple sources of income and also reduce your spending. Have a conversation with your family and friends that can support you with your ideas and goals.

All of the best advice on managing your finances can basically be condensed to these three principles.

More people get into financial trouble because they’re spending too much than because they’re making (or receiving) too little. While spending may seem a simple matter— “I need to buy this, I’d like to buy that”—it’s actually very complex. America is a consumer society, and we’re deluged by advertisements promising that we’ll be happier, more successful, better liked by more people, sexier, and everything else if only we buy this. Companies have spent billions of dollars researching how to manipulate our buying behavior. No wonder it’s so tough to resist these pressures!

Why does a person feel compelled to buy fast food for lunch, or the latest phone or other gadget, or a new video game a friend says is so good, or a new article of clothing? We owe it to ourselves to try to understand our own attitudes about money and spending. Here’s a good place to start:

• Having money or not having money doesn’t define who you are. Your real friends will think no less of you if you make your own lunch and eat it between classes or take the bus to campus rather than drive a new car. You are valued more by others for who you are as a person, not for what things you have.
• You don’t have to spend as much as your friends to be one of the group. Some people always have more money than others and spend more. Resist any feeling that your friends who are big spenders are the norm. Don’t feel you have to go along with whatever expensive activities they propose just so you fit in.
• A positive attitude leads to success. Learn to relax and not get stressed out about money. If you need to make changes in how you spend money, view this as an exciting accomplishment, not a depressing fact. Feel good about staying on a budget and being smart about how you spend your money.
• Be realistic about what you can accomplish. Most students have financial problems, and they don’t just go away by waving a magic wand of good intentions. If your budget reveals you don’t have enough money even while working and carefully controlling your spending, you may still need a student loan or larger changes in your lifestyle to get by. That’s OK—there are ways to deal with that. But if you unrealistically set your sights so high about spending less and saving a lot, you may become depressed or discouraged if you don’t meet your goals.

Without a personal budget, most people have a hard time gauging how much money they spend and where their money goes. If you have ever gone to an ATM to withdraw money and been surprised to discover how little you had left in your account or swiped your debit card and had it declined, this section is for you. Even if you’re very conscientious about paying your bills on time and generally have frugal spending habits, creating and following a budget can put you so much further ahead.

A budget is a plan for how you want to spend money. It details how much money comes in each month and how much you’ve allocated for spending on each thing. The virtue of a budget is that it puts you in control of financial decisions—so you can avoid surprises at the ATM or at the end of the month. Let’s look at some strategies for creating a budget:

Be realistic: People are often intimidated by budgets because they’re afraid the plans will be too strict or force them to cut back too much. Though a budget may reveal that you indeed spend a lot of money on clothes, that’s okay—it may just also need to show that you spend very little on restaurants and eating out to make up for it. Again, it’s about making choices and being realistic. It’s completely OK to spend money on things like clothes, eating out, movies or concerts, or things or yourself. But it’s important to have control over all of your expenses and know exactly where your money goes.

Choose a time line: Creating a budget for a fixed period of time will help you monitor whether you’re meeting your financial goals. The time line you choose is up to you and your goals. For example, you might create a monthly or bi-weekly budget to monitor how you spend your paycheck. 

Add financial padding: Even if you feel like your list of financial obligations is already long, try to set aside a certain amount each month for a “rainy day” fund to pay for unforeseen expenses and emergencies, like car repair, lost textbooks, etc.

Make adjustments as needed: While sticking to your budget is important, there’s nothing wrong with revisiting and adjusting your original targets. For example, if you find that you are actually spending $50 more per month on groceries than you intended (even after shopping for sale items), you may decide to save that money elsewhere in your budget next month—on entertainment, for example.

Tracking one’s income and spending is a good exercise for anyone, and if you follow the basic steps, below, it’s easier than you might think:

Calculate regular expenses: Using your bills, receipts, online banking, and any other financial records you have, make a list of your regular expenses and record how much you typically pay each month or year. Since some expenses may vary from month to month, you’ll want to examine several months’ worth of receipts to come up with an average.

Record your income: Identify all income sources and add up how much you receive during a given period of time. This amount should include all sources of money—from regular full- or part-time work and financial aid, and from intermittent sources, such as freelance jobs, babysitting, family, gifts etc.

Adjust your expense percentages and set goals: After you outline your financial obligations and income, you can start by deciding how much money you’d like to allocate for each expense. Start with fixed expenses such as rent, car payments, a phone plan, etc. Next, decide how much you want to devote to each of the remaining categories, such as food and entertainment. At this point, you can also set specific financial goals. For example, you may decide to lower the amount you spend on clothes in order to pay off outstanding credit-card debt or save for a trip.

Identify a method for tracking your budget: Develop a plan for monitoring your budget. You might decide to use an Excel or Google spreadsheet, a budgeting app, or a budget tracking tool provided by your bank. You can also write things down in a notebook. The method doesn’t matter, so long as it’s easy for you to access, use, and interpret.

Plan ahead to avoid impulse spending. If you have a healthy snack in your backpack, it’s much easier to not put a dollar in a vending machine when you’re hungry on the way to class. Make a list before going grocery shopping and stick to it. Shopping without a list usually results in buying all sorts of unneeded (and expensive) things that catch your eye in the store.

• Before you can make an effective budget, you must examine your expenses and consider what’s essential and what’s optional. There are certain financial obligations most college students have to pay for. Common examples include:

Tuition: This includes the price of attending an institution. Students pay relatively more or less for this based on where you are going to school and how many credits you are taking.

Room and board: These are essentially “food and shelter” costs. Many college students live in a dorm and eat their meals on campus. Students who live off campus will have to pay for comparable things, like renting an apartment and buying their own groceries. Even if you live at home you will likely have some expenses: a car and related expenses (insurance, gas, maintenance, etc.), contributions to the household, or your own basic needs (like clothes, food, or personal things).

Books and supplies: These include books for classes and supplies like notebooks, writing utensils, and calculators. Textbooks are often very expensive, so you may try to find used textbooks for sale; retailers like Amazon and Chegg sometimes offer cheaper, used books or allow you to rent books for a semester.

Transportation: Students typically have some transportation costs, whether it be car insurance, maintenance, and gas, or public-transportation expenses.

Personal needs: Regardless of where you live, you will need money for things like laundry, cell phone, computer, and going out with friends. This expense can vary a lot depending on personal preferences.

In contrast, “optional” expenses are things you want but could easily get by without. You don’t have to spend money on them, and you can spend more or less on them as you choose. Most people spend by habit, not really thinking about where their money goes or how quickly their spending adds up. If you knew you were spending more than a thousand dollars a year on coffee you buy every day between classes, would that make you think twice? Or another thousand on fast food lunches rather than taking a couple minutes in the morning to make your lunch? When people actually start paying attention to where their money goes, most are shocked to see how the totals grow. If you can save a few thousand dollars a year by cutting back on just the little things, how far would that go to making you feel much better about your finances?

For many college students, who may not have a lot of money or a job, owning a credit card may seem out of reach. Without money in an account and assurance that you can pay your monthly credit bill, the average student may not seem very “credit-worthy.” Still, it is important to build a credit history for certain opportunities down the road, such as getting a loan to buy a house or car. Small steps you take now actually help build your credit history. There are plenty of companies that offer special options for younger customers, especially students. Some good offers to look for include error forgiveness (such as waiving penalties the first time you miss a payment), no extra fees, rewards for good grades, and effective customer service. You should still review these offers carefully and always look for cards that have the lowest possible interest rates.

Students should consider the advantages and disadvantages of credit before choosing the best plan:

PROS

• Emergency funds: In an emergency, a credit card allows you some financial flexibility because you can charge the expense and pay it off over time.
• Receiving benefits: In addition to cash back for good grades, credit card companies may offer other benefits such as store discounts, gas rewards, and points toward
• Building credit: If you pay off your credit card every month on time, you will start building credit and have a good credit score early on. Your credit score can be an important factor later on if you decide to open another account or take out a loan.  air travel.

CONS

• Overspending: If something is out of sight, it may be out of mind, and the same can be true of money. Sometimes people overspend with credit cards because it’s easy to think that you have more money than you really do.
• Interest: Credit card companies with student deals still typically include some level of APR or interest rate. If you don’t pay off the entire balance every month, using a credit card can be expensive.
  • Example: Suppose you decide to use your credit card to pay for $1,000 in school supplies and books. Credit card A has an APR of 10 percent, and credit card B has an APR of 24 percent. If it takes you a year to pay off the $1,000, you’d actually pay a total of $1,055.04 with credit card A and $1,134.72 with credit card B—that’s $55 or $135 on top of the original $1,000 you charged! 
  • This example highlights the importance of paying off the balance as soon as possible AND of choosing a credit card with a lower interest rate
• Debt: Unlike debit cards, credit cards allow users to borrow money that they can pay back at a later date. While this can be useful in emergency situations, you may end up charging more than you can afford to pay back right way, and you may find yourself saddled with debt. Carrying a lot of debt can damage your credit history and score.

The most important thing to do if you’re considering applying for a credit card is to do your research. Never make the decision to apply for or use a credit card impulsively, you should always weigh your options and fully understand the consequences. You may get advice from people in your life to never open or use a credit card. Although this advice may be well-intentioned, it’s not always practical. Most of us will need credit at various points in our lives to make major purchases and often, credit scores will be considered for things like renting a place to live or signing up for a phone plan. Having credit cards isn’t necessarily good or bad, that depends completely on how you use them. Here are some tips for how to best use credit cards:

• Pay off the balance each month. An unpaid credit card balance is a sure sign that you are spending more money than you have. To avoid this outcome, keep track of how much you spend with credit cards each month. Pay off the card balance each month, on time, and try to avoid finance or late charges.
• Scrutinize credit card offers. Look carefully at credit card offers. Low rates might be temporary. After a few months, they could double or even triple. Also look for annual fees, late fees, and other charges buried in the fine print.
• Be especially wary of credit card offers made to students. Remember that the companies who willingly dispense cards on campus are not there to offer an educational service. They are in business to make money by charging you interest or fees.
• Avoid cash advances. Due to their high interest rates and fees, credit cards are not a great source of spare cash. Even when you get cash advances on these cards from an ATM, it’s still borrowed money. This option should be utilized in emergencies. As an alternative, get a debit card tied to a checking account, and use that card when you need cash on the go. 
• Use just one credit card. To simplify your financial life and take charge of your credit, consider using only one card. Choose one with no annual fee and the lowest interest rate. Consider the bottom line and be selective. If you do have more than one credit card, pay off the one with the highest interest rate first. 

Credit History & Credit Reports

You begin to establish a credit history as soon as you get your first credit card or get a loan. Everyone needs to understand what a credit history is and how your monetary habits now can affect your future financial well-being and your future options.

Credit bureaus collect financial data on everyone. The credit report they issue is a detailed history of many years of your financial habits. It includes the following:

• Current and past credit accounts (credit cards and store charge cards)
• History of balances and credit payments
• History of late or missed payments
• Inquiries into your credit status (e.g., if you’ve applied for a number of credit cards, this is recorded even if you did not receive the cards)
• Bankruptcy or mortgage foreclosure proceedings

All this information remains in your credit report for up to seven to ten years. For example, frequent overdrafts on a debit card can prevent you from being approved for a credit card, or late credit card payments can prevent you in the future from obtaining a car loan. What you do today can really come back to haunt you!

There are three credit reporting agencies: Experian, Equifax, and TransUnion. Different banks and companies will refer to one or more of these agencies when making a decision about approving someone for credit. By law, you’re entitled to one free credit report each year from each of these agencies. However, many banks and credit card companies will monitor your credit score for free. Do not pay for a credit report unless you absolutely have to. The different agencies use slightly different ratings, but 300–400 or so is considered to be a low credit score and 700–850 is considered to be high. 

Avoiding Debt

As we just learned, the temptation to overspend with a credit card and the interest you are charged on your balance can combine to leave you owing more money than you have. Following are tips that will help you avoid slipping into credit card debt:

• Pay with cash when you can. Use your budget as a guide for how much cash to carry with you.
• When possible, use a debit card instead of a credit card. A debit card is taken just like a credit card in most places, so you can use it instead of cash, but remember that a purchase is subtracted immediately from your account. Don’t risk overdraft fees by using a debit card when you don’t have the balance to back it up. Keep track of every time you use your debit card.
• Make it a priority to pay your balance in full every month. If you can’t pay it all, pay as much as you can—and then remember that balance will still be there, so try not to use the card at all during the next month.
• Never get cash advances on your credit card. With most cards, you begin paying interest from that moment forward—so there will still be an interest charge even if you pay the bill in full at the end of the month. Cash advance interest rates are often considerably higher than purchase rates.
• Don’t use more than one credit card. Multiple cards make it too easy to misuse them and lose track of your total debt. If you have multiple cards keep them at home and carry just 1 with you.
• Get and keep receipts for all credit card purchases. Don’t throw them away because you’ll see the charges on your monthly statement. Write the amounts down in your spending budget. You also need the receipts in case your monthly statement has an error.

Stop carrying your credit card. If you don’t have enough willpower to avoid spontaneous purchases, be honest with yourself. Don’t carry the card at all—after all, the chances of having an emergency need for it are likely to be very small. Having to go home to get the card also gives you a chance to consider whether you really need whatever it is that you were about to buy.

Education is one of the few things you can buy that will last a lifetime. It can’t be taken away, stolen, or destroyed. Once you have a degree, no one take it away. That makes it the safest investment you will ever make. And once you have an education, you are more likely to be employed, earn a higher income, and be more satisfied with your job. People who have an education are also more likely to contribute more in taxes and volunteer more, which means that earning an education is an investment for both you personally and for society.

Paying for college can be difficult to figure out. There are dozens of terms and phrases you will become familiar with throughout the process. But you can start by making a few decisions about your goals. Here are some things to think about:

• Is it important for you to graduate from college without debt? Is it acceptable to you, or necessary, to take some student loans?
• What are your priorities for summers and other “free time”? Working to earn money? Taking nonpaying internships or volunteering to gain experience in your field? Enjoying social activities and time with friends?
• How important is it to take a full load of classes so that your college education does not take longer than necessary?
• How important is it to you to live in a nice place, or drive a nice car, or wear nice clothes, or eat in nice restaurants? How important in comparison to your educational goals?

There are no simple or right answers to such questions, it all depends on what your priorities are. Since you will have to make choices, it’s important first to think about what really matters to you—and what you’re willing to sacrifice for a while in order to reach your goals.

The following strategies can help you set financial goals for yourself:

Create SMART goals: SMART stands for specific, measurable, attainable, realistic, and timely. These kinds of goals are more manageable and can help you reach your final target more easily. For example, instead of setting a broad, vague goal of “paying for college,” you might set a goal of paying off your two college loans five years after you graduate. This more specific, measurable goal can help you keep track of your progress and whether you need to make changes to reach it.

Monitor your spending: Try keeping track of what you spend money on during a one-month period. This can help you see where your money goes and where you may be able to save.

Create a budget: Based on what you discovered after monitoring your spending, create a monthly budget you can stick to. While some expenses, such as food and transportation, are necessary, you may find that you can save money on both by riding a bike (instead of driving) to school and eating out in restaurants less.

Consider working: Some students have full-time jobs while attending college, whereas others may not have a lot of time to work if they’re taking a full academic load. You may have financial obligations (like contributing money at home or paying for a car) that mean you will have to work. Doing both is possible as long as you can maintain a disciplined schedule and stay focused on your long term goals. 

Choose loans wisely: Many college students need some sort of financial support through loans. While loans are a good way to pay for tuition up front if you don’t have the money, remember that they accrue interest until you pay them off. That means that you will end up paying back more—in some cases, thousands of dollars more—than you initially borrowed. Make sure you investigate and apply for as many scholarships and grants as you can since they won’t need to be repaid, and shop around for the loans with the lowest interest rates and best repayment plans. Check with the financial aid office on your college campus—they can provide additional help.

For financial aid administered by your college, often only one general application form is required, along with detailed information on your financial situation (and those of your parents or guardians, if you are receiving their support) provided by filling out the FAFSA (Free Application for Federal Student Aid). If you have not already done this application, learn more here. Virtually all colleges require the FAFSA.

Outside loans and scholarships are generally applied for separately. Follow these general rules to ensure you receive any aid for which you are qualified:

• Apply to your college for financial aid every year, even if you do not receive financial aid in your first year or term. Your situation may change, and you want to remain eligible at all times in the future by filing the application.
• Talk to the financial office immediately if you (or your family) have any change in your circumstances.
• Complete your application accurately, fully, and honestly. Financial records are required to verify your data. Pay attention to the deadlines for all applications.
• Research possible outside financial aid based on other criteria. Many private scholarships or grants are available, for example, for the dependents of employees of certain companies, students pursuing a degree in a certain field, or students of a certain ethnic status or from a certain religious or geographical background, and the like.
• Do not pay for financial aid resource information. Some online companies try to profit from the anxieties of students about financial aid by promising to find financial aid for you for a fee. Legitimate sources of financial aid information are free.

You may already be receiving financial aid or understand what types of financial aid are available. Even if you are not receiving financial aid, however, you should understand the basics because your financial situation may change and you may need help paying for college. You owe it to yourself to learn about potential types of aid you might receive.

There are three main categories of financial aid:

• Scholarships and grants (money or tuition waivers that do not need to be repaid)
• Student loans (money that does need to be repaid, usually starting after graduation)
• Work study programs (money that is earned for tuition or other expenses)

SCHOLARSHIPS & GRANTS

Scholarships and grants are “free” money—you do not have to pay them back, unlike student loans. A scholarship is generally based on merit as demonstrated by past grades, test scores, achievements, or experiences, including personal qualifications such as athletic ability, skills in the arts, community or volunteer experiences, and so on. Don’t make the mistake of thinking scholarships go only to students with very high grades. Many scholarships, for example, honor those with past leadership or community experience or the promise of future activities. Even the grades and test scores needed for academic scholarships are relative: a grade point average (GPA) that does not qualify for a scholarship from one organization may earn a scholarship from another. Never assume that you’re not qualified for any kind of scholarship or grant.

A grant also does not need to be paid back. Most grants are based on demonstrated financial need. A grant may be offered by a college/university, a federal or state program, or a private organization or civic group. The largest grant program for college students is the federal government’s Pell Grants program. 

STUDENT LOANS

Many different student loan programs are available for college students. Ideally, one would like to graduate without having loan balances to repay after college. However, almost two-thirds of full-time college students do need student loans to pay for college. With smart choices about the type of loan and a structured repayment program for your working years after graduation, there’s no reason to fear a loan. Just remember that the money eventually has to be repaid—it’s not “free” money even though it may feel that way while you’re in school.

All student loans are not the same. Interest terms vary widely, and with most private loans the interest starts building up immediately. The best loan generally is a subsidized federal Stafford loan. “Subsidized” in this case means the interest does not begin on the loan until after graduation. These loans generally have terms and conditions that are more favorable to students than private loans, such as lower interest rates, repayments that commence six months after graduation and no need for a co-signer. With subsidized loans, the government pays the interest for you while you’re in school, during your six-month grace period after graduation and while your loan is in deferment. You must also demonstrate a financial need. With unsubsidized loans, by contrast, you are responsible for paying interest on the loan even while you are in school, meaning the terms of an unsubsidized loan are less favorable to you as a student. For unsubsidized federal loans, interest accrues as soon as funds are disbursed. However, you are not required to prove financial need in order to qualify for this type of loan.

LOAN REPAYMENT

Six months after graduation students will begin repaying their loans using one of the following payment plans: the standard repayment plan, alternative repayment plans and income-driven repayment plans.

• A standard repayment plan divides your total student debt equally across a 10-year term. Payments are a fixed amount which makes loan payments predictable, which saves you more money over time and gets you out of student debt fastest. All borrowers are eligible for this plan. This repayment plan often has the highest per-month payment amount, however, if you can afford these higher monthly payments a standard repayment plan is the most affordable long-term option.
• Alternative repayment plans for federal student loans are graduated repayment plans and extended repayment plans.
• A graduated repayment plan has lower payments at first that slowly increase over time, with a goal of paying off the loans within a set period of time, often 10 years. All borrowers are eligible for this plan.
• An extended repayment plan lets you repay your loan balance over a longer period of time, often up to 25 years. Payments may be fixed or graduated and will ensure your loans are paid off within the set timeline. Direct Loan borrowers must have more than $30,000 in outstanding loans to be eligible for this plan.

Alternative, graduated, and extended repayment plans are useful for borrowers who do not have a high-paying job immediately upon entering the workforce but expect to earn more as they establish their careers. However, these plans ultimately cost more over time, so borrowers should be mindful of their interest rates and budget wisely.

Federal loan borrowers can also choose among four income-driven repayment (IDR) plans, which revise your monthly student loan payments based on your income and family size:

• For Pay As You Earn Repayment Plan (PAYE PLAN), your monthly payments will amount to 10 percent of your discretionary income over 20 years. Your payments will never be more than your payments on the Standard Plan.
• For Revised Pay As You Earn Repayment Plan (REPAYE Plan), your monthly payments are reduced to 10 percent of your discretionary income. Your repayment is also extended to a 20- or 25-year term.
• For Income-Based Repayment Plan (IBR Plan), your payments are set at 10 percent to 15 percent of your discretionary income. Your repayment term is either 20 or 25 years, depending on when you took out the loan.
• For Income-Contingent Repayment Plan (ICR Plan), it keeps monthly payments to 20 percent of your discretionary income or the payment amount under a Standard Plan for 12 years (adjusted to your income) — whichever is less. This plan is available for a 25-year term.

Federal loans are usually preferred and more favorable for students, due to lower interest rates and borrower protections such as deferment or forbearance options. However, if you are ineligible or have your own preferences, private student loans are provided by private financial institutions. Eligibility requirements, terms and rates vary by lender. Private student loans also require a credit check or co-signer with strong credit. Please note you will have to contact your lender directly for options if you’re having trouble paying your loans.

Borrowers who are experiencing financial hardship for any reason are encouraged to reach out to their student loan servicer or lender. If you are having trouble paying for federal student loans, due to unexpected circumstance such as a job loss or sudden medical expenses, your servicer can explain your options to help make payments more manageable. This can be through either an income driven plan, deferment or forbearance (you would still be responsible for interest charges that accrue during this period, but payments can be as low as $0 a month).

It is important to contact your lender if you are experiencing financial hardships because missing a payment due date by even one day will put your loan account into delinquency until the past-due debt is paid. Accounts that are delinquent by 90 days or more are reported to the three credit bureaus, which adversely affects your credit. If you never pay your student loans, you will go into default. For most federal student loans, you will default after 270 days of nonpayment. Your wages can also be garnished, and your loans can be sent to collections. These negative marks on your credit report make it harder to borrow credit and can make you ineligible for additional financial aid.

Working with your lender on a manageable repayment plan as early as possible can help you minimize further financial challenges later.

WORK-STUDY PROGRAMS

Work-study programs are the third type of financial aid. They are administered by colleges and are a common part of the financial aid package for students with financial need. You work for what you earn, but work-study programs often have advantages over outside jobs. The college runs the program, so you don’t have to spend valuable time looking for a job. Work study students usually work on or near campus, and work hours are controlled to avoid interfering with classes and study time. Work study students are more engaged with the academic community than students working off campus. Remember the section above that discussed working while in college and be sure to carefully weigh the pros and cons before deciding about a work-study program.

SOURCES

• “Managing Your Money” from Effective Learning Strategies at Austin Community College. Authored by Laura Lucas & Heather Syrett. Provided by: Austin Community College. Available at: https://www.oercommons.org/courseware/8434. License: Creative Commons Attribution-NonCommercial-ShareAlike 4.0 License, available at: https://creativecommons.org/licenses/by-nc-sa/4.0/
• OpenNow College Success. Authored by Cengage Learning. Provided by: CEngage. Available at: https://oercommons.s3.amazonaws.com/media/editor/179572/CengageOpenNow_CollegeSuccessNarrative.pdf License: Creative Commons Attribution 4.0 International License, available at: http://creativecommons.org/licenses/by/4.0/.
• "How Financial Aid Works" from The Office of Federal Student Aid, US Department of Education. Available at: https://studentaid.gov/h/understand-aid/how-aid-works .