College Finance 101

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Whether you are entering college after high school or transitioning from full-time employment, your financial picture will probably change when you become a college student. The summer is a good time to prepare for that change. College may be the first time that you have managed finances on your own, or you may be cutting back on your work hours and living on a lower income while you attend school. Either way, the six tips below can help you develop a financial plan that will help you in the months ahead.

  1. Create a budget

    Whether you’re coming to school with money you’ve saved for personal expenses, a family-provided bank account, or with financial aid designated for living costs, you probably have a lump sum which will need to last throughout the semester or the entire year. Establishing a budget that considers your available funds and your expenses will help you stretch that money over time instead of spending it upfront. Budgets take self-discipline and planning, but they are well worth the effort. Use this helpful budget worksheet to get started.
  2. Don’t borrow more than you need in student loans

    Student loans come primarily from federal or private sources. After federal loan funds are exhausted, some students turn to private student loans to help cover expenses. Student loans provide money to help with college costs, but you will need to repay those funds with interest after you leave school. It’s sometimes easy for students to develop an, “I’ll worry about that tomorrow” attitude about borrowing and take out more than they need. While they are a good investment in your education, loans can add up and become a large financial commitment for years after you leave school, especially if you start using student loans for living expenses. Our advice: only borrow what you need for college bills.
  3. Work part-time while you’re in school

    Getting a part-time job can help bring money in on a regular basis while you’re in school and keep you from using student loans or credit cards to cover personal expenses. There are two different types of jobs: Federal Work-Study, which would have been included on your financial aid award letter, or a part-time job that you obtain on your own. Colleges often have job boards that identify positions as one or the other. You can also look on local job websites for part-time employment. Businesses in college towns often rely on students as a part-time workforce. If you are concerned that work may conflict with your coursework, studies show that students who work less than 20 hours a week actually do better academically and are more likely to graduate.
  4. Be careful with credit cards

    College students often receive credit card offers in the mail, online, and at concerts and events. Those free t-shirts and travel mile offers are intended to entice new banking customers, but they may not be worth it. While wise use of credit is a move toward financial independence, overuse of credit can be a source of financial pressure that can compete with your academic and financial goals. Be sure to read the small print, take out the best rate with the lowest fees, and use credit sparingly, if at all. If you do decide to take out a credit card, the best way to use credit is to pay it off completely every month. That way, you can develop a positive credit history, but not accrue interest and fees that can take years to repay.
  5. Understand your financial aid

    Students who go directly to college from high school often rely on parents to complete financial aid forms, review financial aid, and pay college bills. However, it’s important to realize that you are the person responsible for keeping that financial aid. You must make Satisfactory Academic Progress, get a job, if eligible, for Federal Work-Study, and repay the loan you have taken out. When you are in school, the financial aid office will reach out to you to take action or answer questions about your financial aid. It’s important for you to understand your financial aid and the corresponding responsibilities.
  6. Protect your personal information

    As a student, you may be a primary target of identity theft. Students tend to be more trusting, have new and unblemished credit, and are unfamiliar with the ways their information can be compromised. Be sure to protect personal information like your Social Security number, date of birth, driver’s license number, bank account numbers, PIN numbers, and other related information. Avoid shopping online on public computers and keep personal documents and information in highly secure places. More helpful tips are located in this How to Avoid Identity Theft fact sheet.

Although your income will be lower when you are a college student, you’re certainly not alone. Your classmates are in the same situation. As a general rule, think of the long run instead of just current wants or needs when making financial decisions. If you make smart financial decisions while attending school, you can use your college years to form a strong foundation for the future, both academically and financially.

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