Whether you’re starting college soon or you’re already in the midst of earning a degree, there are certain things on the financial terminology front that you should know a thing or two about.
Hitting the books, working on essays, and hanging out with friends are all part of the post-secondary school experience, and you no doubt want to enjoy this period of your life. But you can easily find yourself shouldering a substantial debt load — because of student loans and credit cards — if you fail to understand the ins and outs of personal finance.
Consider the following statistics, for instance:
- The average student pursuing an undergraduate degree has credit card debt of $3,200; and
- The average student pursuing a graduate degree has credit card debt of $7,800.
In can be argued that many of these students wouldn’t be facing debt problems if they understood the financial and legal terms on the documents and statements they sign. So what follows is a rundown of financial terms every college student should know about. Learning these things now can potentially save you a whole lot of heartache later.
This term refers to the interest accumulating on your post-secondary school loan, while you’re still pursuing your degree, and prior to your beginning to pay the loan back.
Cost of Attendance
This term refers to the total tally for you to go to post-secondary school for a year. This amount includes tuition, living costs, fees, books, food, and more.
If you drop out of school, switch academic institutions, or determine that you’re unable to pay back your post-secondary school loans inside of 270-350 days without reaching out to the lender and arriving at a repayment plan, then you will have triggered a loan default situation. Collections agencies could pester you, and you might be subject to being sued, have your salary garnished, or face other penalties.
Post-graduation, you might determine that it would be advantageous for you to combine your loans so that you only have a single payment and a single interest rate to contend with.
Annual Percentage Rate
This term refers to the monthly effective interest rate that is then multiplied by the number of periods within a year. Remember that the annual percentage rates attached to credit cards geared towards college students are substantial.
Credit bureaus calculate credit scores based on credit histories, so your credit score will dictate the amount of credit you can qualify for. You are entitled to obtain a free credit report annually. When you get it, it’s important to comb over it to ensure that it’s accurate. You should be concerned about your credit score because the tally can help or hinder your ability to get a loan or qualify for for an apartment.
If you need a loan to buy your first vehicle or to buy your first home, you may need to get a co-signer to vouch for you. What this means is that the co-signer, by signing a contract for the loan you need, is essentially telling the lender that he or she will assume responsibility for the loan if you, for whatever reason, don’t follow through with your repayment obligations.
The sum of money you borrow before the addition of any interest applicable.
If you fall into debt and are unable to make payments to clear those debts, you may end up in a default situation that prompts you to declare for bankruptcy. You should avoid this route if at all possible since it will ruin your credit score and impair your financial health.
This is the minimum sum that you need to pay when you get each billing statement. You can avoid late charges if you pay at least the minimum on time.
You’re definitely not too young to learn about financial terminology. The more you know — and put into practice — now, the greater the chances that you’ll be able to stay away from unnecessary debt. Who knows? You might actually enjoy the ins and outs of finances to the extent that you may want to consider careers in areas like banking, accounting, private equity, or fund management.
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