Finances in College
Money concerns in college are common and can cause stress and distractions. A solution is to analyze your financial goals and responsibilities and plan ahead for ways to pay for expenses.
"The cost of college should never discourage anyone from going after a valuable degree."
—Arne Duncan, former United States Secretary of Education
College students often have money concerns, such as affording college while still paying other bills. These concerns can affect their academic success. For instance, money problems are stressful and can prevent students from concentrating on their studies. Or, if students have a lot of personal expenses, they may try to work more hours to cover the costs of living, leaving them with less time to study. Worse yet, some money problems, such as extreme debt, may cause students to drop out of college entirely.
Analyzing your financial responsibilities and planning ways to pay for expenses can help reduce stress.
College students are diverse and may be in different stages of their lives. For example, some students may have just graduated from high school, while others may be older and have families. While these differences will have an impact on financial responsibilities, there are certain financial obligations most college students have to pay for.
Usually, when people hear the words college costs, they think of tuition and room and board. Unfortunately, those costs are only part of the picture. The real cost of college includes a much wider list of expenses, such as the ones below:
- Tuition: Tuition includes the cost of attending classes. This varies by school and also depends on how many courses and credits a student takes.
- Other institution-related fees: Most colleges also charge quarterly or annual fees that cover student services such as the library, athletics, and campus maintenance.
- Room and board: Room and board fees include the cost of housing and meals (usually on campus). These vary by school and region.
- Books and supplies: Most students need to purchase books during their college career. They also need to pay for basic school supplies and equipment (backpack, folders, pens, etc.). Some of these, such as graphing calculators and computers, can be expensive. While they may not be required to purchase them, many students find that it is more convenient and efficient to own their own laptop or computer so they do not have to borrow one or work around library hours.
- Living and transportation: Students living off campus and not living at home will have to think about paying rent. Whether you live off campus or in a dorm room, you might want to purchase household items like furniture and kitchen appliances. Students may also have vehicles that need gas and routine maintenance, or they may need to purchase passes for public transportation.
- Personal needs and entertainment: Students will need to pay for personal items such as clothing, toiletries, etc. They will also probably want to spend money on recreational activities, going out with friends, and so on.
What types of expenses do you think you might face as a college student? The following video will help you review the types of college expenses and examine particular costs that are common for both four-year and two-year institutions.
Consider this passage from "The Hidden Costs in the Soaring Price of Higher Education", by Spencer Rogers:
"It is no secret that four-year college tuition rates have skyrocketed over the past few decades, almost tripling since 1980. In the past six years alone tuition at public universities has risen over 21 percent, and there is no end in sight. Climbing tuition rates are a huge problem and limit social mobility, thereby maintaining our socio-economic imbalance – but at least people know about it, they are trying to do something about it. It is one thing to face an uphill battle combating costs that are alive and well in the public conscious, what about the one that are not?
Remember that six year, 21 percent increase in college tuition? What if I told you prices for room and board have risen the same amount, in the same period? According to College Board the cost of room and board at public universities has risen about 20 percent since 2009. And private universities are almost as bad, having increased their room and board prices by about 17 percent of the same time – and many private institutions require their students to live on campus.
According to Richard Vetter, director of the Center for College Affordability and Productivity, "This is the untold story… we focus on tuition, but we need to look at other costs too."
Income and Financial Goals
Sources of Income
Paying for college is a big challenge, but the following financial resources can help:
- Jobs: Full-time students may find part-time work on- or off-campus, while part-time students may work during the day and then take evening classes. Students can also talk to their guidance counselor and financial resource department about work-study opportunities, which allow students to receive money for completing work related to their studies.
- Free Application for Federal Student Aid (FAFSA): This free application, available here, requires students to answer questions regarding their background and personal finances in order to find out how much financial assistance they might qualify for. The financial assistance comes in the form of government loans, grants, work-study, or scholarships. Financial aid will be discussed in greater detail later in this module.
- Loans: Students can apply for federal loans or personal loans through banks. Loans accrue interest and eventually need to be paid back.
- Grants and scholarships: Students can apply for grants and scholarships through their institutions, local businesses, or online organizations. Scholarships may be awarded on the basis of merit (grades, achievements, volunteer work, etc.), financial need (economic status), or some other set of criteria (achievements and ethnic background, for instance). Unlike loans, grants and scholarships do not need to be paid back.
Setting Financial Goals
Setting financial goals for yourself is one of the best ways to track and manage your expenses.
The following strategies can help:
- Create SMART goals: SMART stands for specific, measurable, attainable, realistic, and timely. These kinds of goals are more manageable and can help you reach your final target more easily. For example, instead of setting a broad, vague goal of "paying for college", you might set a goal of paying off your two college loans five years after you graduate. This more specific, measurable goal can help you keep track of your progress and whether you need to make changes to reach it.
- Monitor your spending: Try keeping track of what you spend money on during a one-month period. This can help you see where your money goes and where you may be able to save.
- Create a budget: Based on what you discovered after monitoring your spending, create a monthly budget you can stick to. While some expenses, such as food and transportation, are necessary, you may find that you can save money on both by riding a bike (instead of driving) to school and eating out in restaurants less.
- Consider working: Some students have full-time jobs while attending college, whereas others may not have a lot of time to work if they are taking a full academic load. Depending on your circumstances, it is worth looking into employment opportunities both on- and off-campus. Even if you feel like only a couple hours of work per week are possible, it could help you pay for something like books so you have one less thing to worry about when you graduate.
- Choose loans wisely: Many college students need some sort of financial support through loans. While loans are a good way to pay for tuition upfront if you do not have the money, remember that they accrue interest until you pay them off. That means that you will end up paying back more – in some cases, thousands of dollars more – than you initially borrowed. Make sure you investigate and apply for as many scholarships and grants as you can (since they will not need to be repaid), and shop around for the loans with the lowest interest rates and best repayment plans. Check with the financial aid office on your college campus – they can provide additional help.
These are only some steps you can take for creating college financial goals, but it is important to find the right ones for you.
Financial Resources for College
When it comes to covering all the costs of college, depending on how much money you have saved beforehand, you will probably want to investigate one or more of the following options:
- Student loans: Students can apply for subsidized or unsubsidized loans through the government. Your college determines the amount of each type of loan offered to you. Subsidized loans allow you to defer payment until six months after your graduation, while unsubsidized loans still accrue interest while you are in college. Students may also obtain private loans through their banks. However, these types of loans are typically subject to more interest. Check the U.S. Department of Education site for information on applying for different types of loans.
- Grants and scholarships: Grants and scholarships do not need to be paid back. Students can look for grant and scholarship options through the government, their schools, and their communities. Scholarships may be awarded on the basis of financial need, academic merit, or talent. You can visit your guidance counselor or financial aid office for listings of available grants and scholarships, or conduct independent research at sites like College Scholarships.
- Jobs: There are a number of paid work opportunities for college students, ranging from work-study to on- and off-campus jobs and internships. If you have the time to commit to working while you are in school, it is worth investigating all of them. The topic of student job opportunities is covered at length later in this module.
Applying for Financial Aid
Applying for financial aid requires planning and organization. Below are steps you can take to increase your chances of getting help paying for college.
Complete the Free Application for Financial Student Aid (FAFSA)
This free application asks students questions about their background, personal finances, and college, and provides information about what loans, work-study, and other types of aid they might be eligible for. You may be unaware of factors that affect how much financial assistance you are eligible for, such as changes to your parents' income or your job status, or having a sibling start college. This is why it is important to fill out a new FAFSA application annually.
Make Sure the Information Is Accurate
Although it can be a chore to track down exact amounts (and it is so much easier to estimate things like your parents' or your income), failure to provide accurate numbers can mean that you may not qualify for all the financial assistance you're actually eligible for. Before you fill out the FAFSA form, be sure you have collected and have handy all the important information you'll need. This includes your (and your parents') tax forms, social security number, and income statements. The U.S. Department of Education's Site for Federal Student Aid has more tips on how to effectively fill out your application.
Ask Your High School and College
If you're still in high school or if you've recently graduated, ask your guidance counselor about grants and scholarships you could apply for. Your college will also be a good resource since most institutions have their own scholarships and awards that are available to their students.
Ask Your Community
Check to see if your employer, place of worship, clubs, or volunteer organizations have any grant or scholarship opportunities. Although these sources may not offer as much as federal loans or college scholarships, they may help you cover the costs of books and/or supplies.
Check Due Dates
Whether you're filling out the Free Application for Student Aid (FAFSA) or applying for scholarships, most organizations will have deadlines that you must meet–they are not flexible dates. These deadlines help ensure that if you are eligible, you will receive your financial assistance in time for the upcoming school year. If other people are helping you with your application – for example, teachers writing letters of recommendation for you – be sure to inform them of the deadlines and give them plenty of notice. The more time you give those helping you, the more time they'll have to write good recommendations.
Write Strong Essays
Many scholarship applications will have an essay component. You can assume that the other students applying for a particular scholarship also meet the basic requirements (a certain GPA or above, certain demographic criteria, etc.), so often it isn't enough to just have good grades or be "eligible" for a scholarship: the essay can be what really sets you apart. When you write application essays, make sure you have the time to write multiple drafts. You should also have family, friends, or teachers provide feedback as you go through revisions.
As this video shows, regardless of your background, which college you're attending, or your time commitment, there are numerous financial aid opportunities for you to consider:
Check Your Understanding
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