Home > Uncategorized > 6 Common Money Mistakes College Freshmen Make

Comments 0 Comments
Advertiser Disclosure


College freshmen across the country are settling in at school for the first time and, with the high cost of tuition, money is in short supply. But even if they’ve gotten great deals on their textbooks and saved money on their school supplies, are they prepared to be responsible now that they’re making their own financial decisions?

According to a 2013 study sponsored by Higher One, many may not be. The study found that 20% of college students have bought things they can’t afford and 24% believe that others would be horrified by their spending habits.

In just the first few weeks and months, as college freshmen adjust to their new responsibilities, they’re at risk of making several common financial mistakes. Here are six of the biggest financial mistakes that freshmen make and how they can avoid them.

1. Not Creating a Reasonable Budget

Going away to college without creating a budget can be a recipe for disaster. Students without budgets are at risk of running out of money before the end of the year, or even before the end of the first term.

But even students who do have budgets can run into problems. Because most high school students don’t have to pay for their own expenses, they don’t truly understand how much everything is going to cost. Their first attempt at a budget might not take everything that they need into account. Even if students base their budget on the college’s estimated cost of attendance, that figure often underestimates the actual costs.

If students want a more realistic budget, they can create a budget before college starts and then revise it after looking at their expenses in their first month. If they’ve spent too much, they will either have to cut back, learn how to be more frugal or find an additional source of income. Each month, they can check back in to make sure that they’re on track.

2. Charging It Like It’s Free

Many students are already setting themselves up for years of debt by taking out student loans. But some students also add credit card debt to the mix. During orientation and in the first few months of school, there are lots of opportunities to get a credit card.

The trouble can come if students use their credit cards to make up for gaps in their budget or to splurge. Since students are new to credit, their “starter credit cards” tend to have higher interest rates than people wit better credit scores, so credit card debt can quickly spiral out of control for a cash-strapped student.

Getting a credit card can be a perfectly good idea, as long as the student doesn’t use it like it’s ‘free money.’ In fact, opening a credit card and using it responsibly can help you build credit. Responsible credit card use entails keeping your balances low relative to your credit limit (ideally 10% or lower) or paying it off in full every month, and paying your bill on time, every time. When you’re establishing and building a credit history, it can be helpful to check your credit reports and credit scores to see where you are, and to track your progress. You can get your free credit reports once a year from each of the three major credit reporting agencies on AnnualCreditReport.com, and there are many ways to get your credit scores for free, including through Credit.com.

3. No Longer Looking For Scholarships

Another mistake that freshmen make that can end up being extremely costly is that they stop looking and applying for scholarships. While the majority of scholarships are available to students who are seniors in high school, there are still hundreds of millions of dollars’ worth of scholarships that are targeted towards students who are currently in college.

To make sure that they know about scholarships they can apply for, it’s important that freshmen get to know their financial aid officer and let them know that they’re looking to apply for scholarships. The financial aid office will let them know how to apply for the institutional scholarships that their college gives out, and might even contact them for last-minute scholarship applications.

In addition, freshmen can continue to search for scholarships online. Winning even just a few thousand dollars in scholarships each year can make a huge difference when it comes to a college student’s budget.

4. Peer Pressure

Peer pressure may be difficult in high school, but in college it can take on new dimensions. Students do not have their parents around to moderate their spending. With this newfound independence, some students get into trouble trying to keep up with their peers who either have more money or aren’t financially savvy.

Depending on who their friends are, freshmen might be pressured to eat out often with friends, buy expensive clothing, go out drinking every weekend, or go on a costly Spring Break getaway. That kind of spending quickly adds up and can lead some students into significant financial trouble.

It’s important that students and their parents talk about how the student will handle peer pressure. They could potentially decide to say no, get an extra job (there are usually plenty of on-campus options) or find lower-cost alternatives.

5. Failing Classes

For most freshmen, the social aspects of college are important. But when students spend more time hanging out with friends than studying, it could lead them to fail their courses. Failing a course isn’t just a problem from an academic perspective – it’s also a problem from a financial perspective.

Not only will the student have to spend time making the class up later on, they also may have to pay additional fees in order to retake the course. This could cost a student hundreds or even thousands of dollars.

It’s important that students remember why they’re at school and how much it’s costing them to be there. They should be sure to prioritize schoolwork and may even need to get a tutor if they’re in danger of failing.

6. Working for Minimum Wage

Many students have to work to get through school and it’s not uncommon for them to end up working in minimum wage jobs. However, there are a lot of ways that students can make more money per hour and have a flexible schedule.

For example, if a student did well in high school, they can start a tutoring service for local high school students. Many parents will pay $15-$30 per hour for tutoring. Students should also consider finding ways to use their talents. For example, if a student is good at photography or if they like music, they can do wedding photography or DJ.

Students could also leverage the skills that they’re learning in class by doing graphic design work, creating websites or doing social media marketing for small businesses. There are also a number of easy ways to make money online such as starting a blog and monetizing it, creating an Etsy store or doing remote work.

It’s important for students to find ways to leverage their time so that they can make more money for every hour that they work.

Avoiding These Mistakes

Avoiding these six mistakes isn’t easy. There are so many temptations for freshmen to overspend and many don’t yet understand the long-term consequences of their financial mistakes. It’s important that parents talk to their kids about how they’re going to handle money in their freshman year. By talking to students and ensuring that they’re aware of spending pitfalls and how to avoid them, you make sure your child is less likely to be calling you come November because they need more money.

More on Student Loans:

Image: Photodisc

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team