For young adults, making mistakes is pretty much a given. Many times, these mistakes serve as good learning opportunities, but sometimes they have bigger consequences that are best avoided.
According to a US Census report, Millennials and Generation Z face a more difficult journey to economic independence than previous generations. Early financial errors can be particularly crippling, which is why starting out on the right foot is crucial for college bound students. The best way for parents to help is to be aware of these three common financial mistakes.
Racking Up Credit Card Debt
Young college students are susceptible to credit card debt. A recent report found that 46% of college students have credit cards, and that 61% of them got their first card when they were 18 or younger. Of those students who were surveyed, more than a third have over $1,000 in credit card debt.
Even though the Credit Card Act of 2009 added additional consumer protections for those under 21, college kids are still a vulnerable market. Credit card companies may offer products actively targeted to young adults. For this reason, parents should discuss best credit card practices with your child. This will help them avoid incurring credit card debt that can quickly snowball out of control. You should also emphasize the importance of paying bills on time and limiting spending.
Misusing Student Loans
Another costly blunder college students may make is not using student loan refunds properly. When the amount of financial aid borrowed exceeds the amount needed for tuition and fees, students may receive a student loan refund check for the overage. The refund check amount could be substantial, and it might be tempting to spend it on other things than school related expenses but just remember that the refund is still part of your student loan. Students should fully understand how student loans work prior to taking them out.
Reviewing college expenses and the loan process with your child can be instrumental in preventing student loan misuse. Devising a plan for student loan repayment in conjunction with your child will help facilitate smarter financial decisions. Your college student will make smarter choices once they have all the information and financial understanding.
Not Filling Out the FAFSA Form
“I don’t need to apply for FAFSA because I won’t qualify.”
Have you heard college students express this sentiment before? The answer is likely yes because it’s one of the top reasons that students don’t complete the Free Application for Federal Student Aid (FAFSA).
According to the National College Access Network, the FAFSA completion rate for 2018 high school graduates was only 61%. While that number has been steadily climbing over the years, there are still a significant number of young adults who make the mistake of not applying for federal aid. What those students may not realize, though, is that most actually do qualify for some form of aid.
The other FAFSA error college-bound teens make is delaying their form submission.
These students usually aren’t aware that in most states and even for some schools, financial aid is given out on a first-come, first serve basis. The final deadline for the form isn’t until June 30th prior to fall semester, but many states and colleges have earlier deadlines. This is all to say, the sooner your child fills out the FAFSA form when it becomes available, the better.
Parents can play a valuable role in helping students understand the benefits of the FAFSA and the urgency behind getting it in every year. Just one hour spent on this application can save your teen thousands of dollars on their college education. Foregoing filing the FAFSA is a financial mistake that ALL college students can avoid. Don’t let your child miss out!
