Caveat Emptor or Buyer Beware 25: Avoid Overspending Financial Aid

Saturdays we share tips or cautions to facilitate getting scholarships or avoid problems

Laurel went to college on a combination of financial aid. She received a partial tuition scholarship, worked a summer job, and took out federal loans. Her middle-class parents also helped support her with money for school. Unfortunately, Laurel (like many college students) let the surplus of money confuse necessities and luxuries while in school. She insisted on living in a very upscale apartment with only one roommate. She also bought a new car. She, her roommate, and friends would eat at restaurants and take out rather than cook their own meals. She bought new clothes each month. As a result, she increased her student debt by $40,000 more than she needed to spend.

Basic Costs of Education Rise

Media stories frequently highlight the increase in the cost of higher education. Essential costs have risen in the past few years, and will continue to rise in the future. On August 26, 2013 Michelle Jamrisko and Ilan Kolet of Bloomberg reported:

“The cost of higher education has surged more than 500 percent since 1985…tuition expenses have increased 538 percent in the 28-year period, compared with a 286 percent jump in medical costs and a 121 percent gain in the consumer price index. The ballooning charges have generated swelling demand for educational loans while threatening to make college unaffordable for domestic and international students.”

Too Much Money May Lead to Overspending

Just because you, or your children, get all the extra financial aid for college does not mean that you have to spend it on extravagancies. You may reduce the amount of student debt in several ways:

• Live with parents or less expensive student housing rather than units with tanning salons, spas, sprawling pools, and more
• Cook your own food rather than eating out everyday
• Reduce consumption of alcohol, drugs, and other recreational wants
• Travel to domestic rather than exotic or international vacation locations
• Use public transportation or buy a used car rather than a new one

Tuesday we share Student Awards as a source of financial aid for college

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