1: Identify and document your goals
It's important to identify and document your long-term personal, professional, and financial goals so that you can gauge your progress in achieving them. Answering the following questions can help you establish and achieve your goals.
- What do I want to accomplish in my career?
- Will I have to go back to school?
- Where do I want to work and live?
- What kind of lifestyle do I want?
- What hopes do I have regarding a family?
- When do I want to retire?
- How much will I need to earn to achieve my goals?
You should review your goals from time to time so that you can update them as your circumstances change. For example, if you get married, you may want to re-examine your goals so that you can be certain they are consistent with those of your spouse.
2: Make well-informed choices
The cost of your education really is up to you. How much you "spend" getting your degree is a result of the choices or decisions you make. For example, the cost of tuition depends on the school you choose, the cost of housing depends on where you choose to live and whether you live alone or with one or more other people who can share costs with you, the cost of food depends on your eating habits and where you choose to eat. Once you make a choice, you must pay the required cost.
You are responsible for the choices you make - not your parents, not your friends, not your siblings, not your financial aid administrator, not your faculty advisor, and so forth. Think carefully about what you'll have to give up once you're working in order to pay back the debt you incurred because of the choices you made as a student. Be certain you'll be willing to make these sacrifices before you spend your borrowed funds while in school.
3: Borrow the minimum amount you need to achieve your goals
The key to borrowing the minimum amount you need to achieve your objectives is to make sure you're sticking to an affordable in-school budget plan. Your budget should include your available financial resources, your planned education expenses, and the financial commitments you made before entering school that will continue while you're in school.
Once you've developed your in-school budget plan, you should be able to determine how much you will need to borrow. But will you be able to afford to repay this amount once you graduate?
Answering this question can be an effective motivator in helping you minimize your in-school borrowing. As long as your future income is sufficient to pay for your future lifestyle, including repaying your student loans, then you probably can afford what you plan to borrow. If not, you should carefully consider making some adjustments to your in-school budget so that you can reduce what you'll have to borrow (and ultimately need to repay).
For more information on budgeting and planning your financial future, visit www.accesslex.org.
4: Maintain accurate financial records
You should keep copies of all documents relating to your financial activities. For example, at a minimum you should retain the following items:
- Loan documents (e.g., applications, promissory notes, disbursement and disclosure statements, loan transfer notices, lender correspondence)
- Receipts for major purchases (e.g., computer hardware and software, appliances, furniture, cars, any items with warranties)
- Income tax returns and all the documentation used to prepare those returns (federal, state, and local, as applicable)
- Estate planning documents including your will
It's important to save all of your student loan documents and correspondence so you know exactly what you've agreed to, what's expected from you as a borrower, and how much you've borrowed. It may not seem important at the beginning of the student loan process, but when you're closer to repayment, you may need to refer to some or all of these documents. Keep all student loan related documents and correspondence until all education loans have been fully repaid.
You also should keep a log or journal of all conversations with the lender(s) and servicer(s) of any loans you borrow. Include the date and time you called, the reason for the call, any expected follow-up, and the full name of the person with whom you spoke. This log may come in handy if there is a dispute about the conversation at some later date.
5: Establish & maintain a strong credit history
Your credit report is a summary of your credit history. Just as your academic transcript is a history of the courses you've taken and how you've performed in those courses, your credit report can be viewed as your credit transcript because it lists the credit you have obtained (by individual account) and how you've managed that credit.
Never underestimate the value of good credit. You must demonstrate a good credit history to be approved for most private student loans as well as other forms of credit including home mortgages, auto loans, and business loans. You have a credit history if you have at least one credit card, consumer loans such as auto loans, student loans, or any other form of personal credit. The fundamental issue for the lender is your "willingness to repay the loan," that is, the likelihood that you'll repay the loan based on your past credit performance.
The following credit tips can help you maintain a strong credit history:
- Pay all your bills on time.
- Minimize your credit card debt; keep credit card balances to no more than one-third of your available credit limit.
- Avoid charging more than you can afford to repay.
- Check your credit report (and credit score) at least once a year from each of the three national credit reporting agencies; promptly correct any errors that you find on your reports.
- Limit the number of credit card accounts you maintain.
- Be careful about opening new credit card accounts and closing older ones; it is beneficial to have the longest possible history regarding the age of your credit card accounts.
- Notify your creditors immediately whenever your address changes.
These five habits are important to your financial future. Develop these habits early and use them to realize your dreams. Making practical, common sense decisions using the best possible information should allow you to achieve your goals without sacrificing your financial future.
This article is courtesy of Access Group, Inc., a nonprofit student loan provider specializing in loans for graduate and professional students. They also offer Federal Stafford Loans and private loans to undergraduates at select colleges and universities. To find out more, or to find out if your school participates in their loan programs, please visit their website, www.accesslex.org.