Top Money Mistakes College Students Make

Debt ranks among the biggest problems for most students

Shopper takes the credit card out of wallet.
Photo: RobertoDavid / Getty Images

College students face many hard financial decisions when it comes to managing their money. As young adults, they need to figure out how to pay for college, earn some spending money, and still get a good education. That's a tall order for anyone, so it’s no wonder that many college students end up making some costly money mistakes.

Certain financial missteps can cause damage that lingers for decades, so making sure your finances are in order, even as a college student, can go a long way in helping you get a good start after school.

Learn about some of the most common money mistakes college students make and how to avoid them.

Racking Up Credit Card Debt

Credit cards are a convenient way to pay for things, and many cards offer rewards programs or cashback incentives that add to their appeal. The problem is that these benefits often overshadow the drawbacks, such as the potential to accumulate debt.

Many cards have high-interest rates and unfavorable terms and allow students to spend more money than they have. If you get into the habit of only paying the minimum payment each month, you could be stuck trying to pay off the card long after graduation day.

Credit cards can play a vital role in establishing your credit history, so that doesn’t mean you need to avoid them altogether. Instead, credit cards should be used wisely. That includes applying for new credit only when you need it, paying your bill on time every month, and only charging what you can afford to pay in full. It will still allow you to collect the rewards or earn cash back, while not having to deal with finance charges and long repayment periods.

Ruining Their Credit Score

While on the topic of credit cards, it’s important to highlight the dangers that come with going into credit card debt. Many college students end up completely ruining their credit history by making a few poor decisions.


Remember: Missed payments or other negative marks will remain on your credit history for seven years, severely damaging your credit score.

Making a single late payment in college can come back to haunt you later when you apply for a loan for a new car or try to buy a home. The most important rule to follow with credit is to always pay on time.

Keeping debt balances low and using different types of credit can also help contribute to a solid credit score. 

Not Using a Budget

College is one of the best times to get into the budgeting habit. While you may have fewer financial responsibilities at this point in your life, habits you create now can stick with you for years to come.

As a student, you may have a limited or sporadic income; if you don’t track your spending carefully, it’s easy to waste money on things that you don't need.

Start by creating a simple budget. It doesn’t take long, but if you take the time to analyze your income and where you’re spending money, you can get a better idea of where your money is going and where you can cut back.


Don't forget to leave room in your budget for savings. Even if it's only $5 or $10 a week, that can add up over time. 

Misusing Student Loan Money

The cost of college tuition has gone up dramatically in recent years, so it may be hard to keep up if your parents aren't able to provide financial support. Many students rely on student loans to pay for their degrees.

Sometimes, students will use some of their student loan money to buy things that aren’t essential for school. For example, using some of the money to fund a spring break trip might make for a good time, but it could dig you into a financial hole that is hard to get out of—even after graduation.

Stick to using your student loan money only for necessary living expenses. Even better, consider sending any excess money to your loan servicer while you're still in school as an advance against repayment. 

Choosing an Overly Expensive College

Does the name of the school on your diploma matter? In some cases, it does. In other career paths, perhaps not so much.

Many students dream of going to a prestigious school or heading out of state, but this may not be the best decision financially. With some degrees, it may not matter as much where your degree comes from. In that case, spending more money to earn your degree may be wasteful.

Choosing a less-expensive public university or attending a community college for the first two years then transferring may be the better option, cost-wise.

Before enrolling in your dream school, consider what the true return on investment may be. Take time to explore other options and see whether a prestigious school is the only way to pursue your chosen career path.

You may find that a different school proves to be the better bargain. In doing so, you'll position yourself to begin your professional career with less student debt. 

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  1. myFICO. "Unexpected FICO® Score Changes."

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