Avoiding Debt in College

Junk food, credit cards and no parents watching – debt goes with weight gain in college like letterman jackets and dry leaves across the quad. Students must learn the dangers of over-spending with plastic, and here’s how to keep down debt and your waistline.

This time of year, millions of students either embark from high school to college or return to campus from their summer. It’s also when bad habits often result in freshman 15. This collegiate legend means that in the first few months of the new school year a student gains weight – maybe as much as 15 pounds – due to poor eating habits, stress and perhaps drinking.

I expand freshman 15 to also mean 15% of credit card debt. Like over-consuming food, over-consuming money on credit leads to bad habits and bad consequences.

When I was a college freshman the credit card offers poured in. What amazing copywriting, as if credit card companies wrote these offers just for me. The companies seemed to understand my situation; their words made perfect sense. Credit card companies pay copywriters thousands of dollars because that writing sells. Sell me it did. Had I not caught myself, I’d still have card debt at a rate of 15%.

Some campus traditions never change: Almost three quarters of undergrads and more than nine out of 10 graduate students use credit cards. Fewer than 10% of collegiate cardholders pay their full balance each month, only 15% have a clue about their interest rate and fewer than one in 10 know their rates, late fees and over-limit fees.

When college ends, most students and parents face heavy student loan debt. Compound that with debt from credit cards and many students get a first hard financial lesson after graduation.

To avoid the 15:

Pay yourself first. If you get student loans, scholarships, work study or grants, put a little aside. You’ll be surprised. As the money grows you want to save more and spend less.

Carefully consider applying for a credit card. College students used to apply for retailers’ charge cards to slowly build a credit rating. Credit runs freer now and a bank card might quickly ensnare you in debt. Why do you need the credit card? If you don’t, don’t apply. Chances are if you have to buy something on credit, you can’t afford it. Consider cards specifically for students.

Talk to your parents about credit. They know more than you think. Parents, talk to your kids about credit. They’ll listen more than you think.

Consider a card with no annual fees and a low credit limit. Use it just for emergencies, pay off your balance monthly and never spend more than you can pay off in one month.

Have an accountability partner. This could be parents with access to your account who can help monitor and ask questions. In many cases, parents also cosign for kids’ first cards.

Establish an eating budget. Avoid dining out. Plan meals around your class schedule at the school’s cafeteria. Pack a lunch and snacks if on campus and away from your dorm or apartment most of the day; this curbs binge eating and spending when you’re hungry. Grocery shop when you’re full, not hungry. Go home for holidays and breaks – you’ll appreciate the food you once got for free.

Some financial moves dovetail with losing weight. Most colleges have free gyms and workout rooms for students, for example. Walk or bike to class to save on gas. If you must drive, park as far away as possible and walk – more exercise and fewer meters to feed. Take an exercise or nutrition class; you need these credits anyway and you might as well use the classes to your advantage.

Use your college years to establish good spending and eating habits. You’ll graduate more prepared for success.

Follow AdviceIQ on Twitter at @adviceiq.

Sterling Raskie, MSFS, MBA, CFP, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill. He is an adjunct professor teaching courses in math, finance, insurance and investments. His blog is Getting Your Financial Ducks in a Row, where he writes regularly about investments, retirement savings and financial planning.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.