5 Essential Things for Students to Understand About Finance
By Kay Broughton, SUNY Blog
April 25, 2016
April is Financial Literacy Month, a great time to get educated on your financial situation. It’s no secret that SUNY offers a world-class education combined with reasonable tuition. But no matter what we achieve, we never stop searching for the perfect formula for student success. We work hard to keep the cost of a SUNY education lower than the national average and degree attainment affordable.
SUNY Smart Track was created to make the cost of attending SUNY clear and understandable to our students and their families. Smart Track was designed to help students and families understand the ins and outs of college financing, from the cost of tuition and fees to personal money management education so you’re ready to be responsible after graduation.
Whether current or prospective student, Smart Track is available to help you learn everything you need to know about your money. But in the meantime, we’ve also created a list of the essential financial information students should be familiar with to make themselves independent and self-sufficient.
Know Your Own Money Philosophy
According to Smart Track‘s Knowl, “If we really stop to think about our financial patterns and habits, we can begin to see a trend within ourselves. These spending patterns are determined by which part of our brain we tend to use the most, which can and does vary from one person to the next.” You can find out about your own spending patterns by taking the quiz in the “Money Psychology” course on Smart Track.
Understand the FAFSA
The FAFSA, or free application for federal student aid, is an essential first step in the financial aid process. It’s only a 30-minute online application which could provide thousands of dollars towards your college costs. The FAFSA application should be filled out each year you attend college. Without completing a FAFSA each year you want to attend school you are not eligible to receive loans, grants or work study. According to the FAFSA website, students can file their FAFSA as early as January 1st. Some funds are only available on a first-come first-serve basis, so you should complete your FAFSA as early as possible.
Different Types of College Loans
According to the New York Times, two thirds of students will borrow money in order to pay for their undergraduate education. With so many students taking out loans, it’s paramount that students understand how these loans work. First there are need-based loans. Subsidized Stafford Loans and Perkins Loans are need-based. This means they are awarded to students whose FAFSA’s suggest a high financial need. For these loans the government pays for the interest while you are in school. Each loan type also comes with a different grace period. Subsidized and Unsubsidized Stafford Loans both have a six-month grace period. The grace period for a Perkins Loan is nine months. PLUS Loans don’t have a grace period, but payments may be deferred until you are out of school, at your request.
Understand Interest to Better Understand Debt
There are three terms you need to understand in order to understand debt: Principal, Interest, and Debt Balance. Principal refers to the original amount of money that was borrowed. Interest is the cost of borrowing that money, and Debt Balance is the combined total of both principal and interest. Interest is usually calculated as a percentage of the loan. However, it is important to understand that interest is typically added over the course of a loan, rather than in one lump sum. This is often referred to as the annual percentage rate (APR). This means that the longer it takes to pay back your loan, the more it will cost in interest. That is why it is so important that you make more than the minimum payments on your loans. According to Clear Point, with the right planning you can cut your loan payment time in half.
Building Credit Builds Opportunity
Your credit history tells others just how good you are with managing, borrowing and repaying money. Checking your credit report regularly is an important step in establishing or maintaining good credit. Most credit bureaus are either owned or under contract to the nation’s three major credit reporting agencies: Equifax, Experian and TransUnion. If you find an error in your report you should contact the credit bureau and the business that provided that information (like the collection agency or the credit card company). Your credit score is built based on a few basic things. The first is your payment history.
This shows how good you are at paying the minimum on your debt as well as paying your bills on time. The second factor is what you owe. Maxing out on your credit cards every month, for example, negatively impacts your score. The length of your credit history is also a factor. Essentially you want to prove that you can maintain good credit over time. This is why closing old accounts can bring your score down. What types of debt you owe also affect your score. Having multiple debts, such as auto loans and student loans can negatively impact your score. And finally, how much new credit you’ve applied for affects your score. Knowing what factors affect your credit can really help you control your score.
Want to learn more about the best ways to handle your finances? Take the free Smart Track courses today!
This article was originally published on SUNY Blog.
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