Students blame spiraling college costs as the No. 1 culprit for their debt. But knowing this won't provide you with much consolation if ramen is all you can afford to eat as you whittle down your student loan and credit card bills. Whether you're in college or haven't started yet, there are ways to shrink your debt or avoid it entirely.
Here are some tips to get you started:
Control your costs
1. Stick to a four-year plan. According to UCLA's Higher Education Research Institute, only 28% of students at public universities graduate in four years. When college classes drag past the traditional eight semesters, debt piles up.
The rates vary wildly: 84% of students at the University of Virginia exit on time, but only 51% of undergrads at the University of Texas at Austin do. At San Diego State University, less than 29% of students graduate in four years.
College administrators tend to blame students for dawdling, but low graduation rates also can mean students can't register for the classes they need because of overcrowding. If you're interested in schools with pitiful grad rates, ask the school how some students manage to beat the odds. Avoiding universities with lousy graduation rates will be far more beneficial than working extra shifts at Baskin-Robbins.
You can find compare schools' four-year grad rates at College Results Online.
2. Get a campus job that really pays. At most colleges, it's still not too tough to find a campus job. If you want a job that can seriously boost your chances of graduating debt-free, however, consider applying to be a resident assistant. Many RAs get their room and board free, which at plenty of schools can outstrip tuition costs. At UCLA, for instance, tuition and fees for 2011-12 are estimated at $12,686 for in-state students, but residence hall room and board was an even bigger cost, at about $13,968. It can pay handsomely to ask about the availability of campus jobs when evaluating schools.
3. Get responsible now! Start showing some restraint on what you buy, and give budgeting a whirl. "Most teenagers today have been given a lot by their parents, and now is the time to get realistic about what it's like to manage their own money," says Gerri Detweiler, a personal finance adviser at the website Credit.com.
Use credit wisely
If you're a college student, it has become a lot harder to party with plastic.
Thanks to the Credit CARD Act, credit card issuers can no longer give consumers younger than 21 a card unless a parent, guardian or spouse co-signs the application. The only way young college students can dodge this crackdown is if they provide proof that they have the financial means to repay their debt.
And that's not the only restriction. Full-time college students now have access only to credit that's less than $500 or 20% of their annual income.
While this may not seem fair, Congress was trying to protect students from making bad credit decisions on campus quadrangles across the country. For years, card issuers paid universities millions of dollars for the right to ply students with free gifts, says Daniel Ray, the editor-in-chief of CreditCards.com.
4. Cool your jets. You may feel all grown up, but credit experts say it's absolutely OK to wait until you're a college senior to obtain a credit card. You won't need a credit history until then, and you'll stay out of trouble longer.
5. Use a debit card. You'll get lots of practice acting financially responsible if you pay as you go. Relying on a debit card that's linked to a free or inexpensive student checking/savings account will provide excellent financial training wheels.
