If you’re like me when I started college, you have no idea what paying for college entails. Sure, I had a scholarship, but I had no idea how much books and other expenses would cost (spoiler alert: a lot).
If your parents sat you down and explained what it takes to pay for college, you’re already miles ahead. And if they’re helping you pay for college, you’re even better off.
But even the most basic budgeting discussion won’t cover everything you need to know about paying for college, so here are some things you might not have heard yet.
1. You could’ve been saving all along
It’s not uncommon for parents to encourage their children to save for college while they’re in high school. But even if you have some cash in savings to help pay for your education, you’re missing a key option: a 529 college savings plan.
If you’re under 18, your parents can open up a 529 plan and make contributions on your behalf. What sets a 529 plan apart from a savings account is how the money in your account grows and how the government taxes it.
With a savings account, you’re likely earning rock-bottom interest rates. And the government taxes the interest income you receive regardless of whether you take it out of your savings account.
With a 529 plan, however, you can invest your contributions to get a better return. Plus, the money you earn in the account is tax-free as long as you use it for eligible education expenses. That might not mean a lot to you now, but it can help you save money when it matters.
2. You can’t use student loans for just anything
If you plan to apply for federal student loans to help you cover the cost of your education, the government has some limits on how you can use the money.
According to the Higher Education Act of 1965, eligible expenses include:
- Tuition and fees
- Room and board
- Textbooks and supplies
- Transportation to and from school
So, if you’re thinking about using your student loan money to pay for a spring break trip or a new wardrobe, don’t. No one’s going to be checking your bank account, of course, but it’s an unwise choice.
3. You’re on the hook for a lot more than tuition and books
When I left home, I had no idea how much it would cost to live on my own. Like most people, I grew up not worrying about paying rent, buying groceries, or staying current on electricity bills. So, when I headed to college, I was completely unprepared.
Even if your parents are helping cover your living expenses, it’s wise to learn how to create a budget and track your spending.
Start by asking your parents about the expenses you should expect. If you’re already in school, write down the different things you spend money on each month. Break them down into three groups:
- Recurring expenses: This category includes rent, utilities, and debt payments, if applicable.
- Other necessities: These expenses, such as groceries and gas, can change from month to month.
- Discretionary spending: This category covers the cost of fun purchases, such as entertainment, eating out, and clothing.
Set specific goals for each spending category and track how much you spend during the month to see how you’re doing. You might need to make adjustments each month, but you’ll be better off than you would be if you were winging it.
4. You can earn more working off campus
Unless you have special skills, there likely won’t be many high-paying jobs on campus. What’s more, you’ll be competing with all the other students for a limited number of positions.
If you broaden your horizons a bit and search off campus, you might find a better selection. You might even find a job that offers more real-world experience than you’d get scrubbing toilets at the student center on campus.
My first job in college was an on-campus job that paid minimum wage, which was $5.85 per hour at the time. But I quickly swapped it for a job about 10 miles away that paid $10 per hour. Over the course of two years, my hourly wages jumped to $14 an hour. I also gained valuable experience as a customer service supervisor.
The main drawback of an off-campus job, however, is transportation. If you don’t have a car, you’ll need access to good public transportation to have a chance of getting to and from work in a timely manner.
5. It pays to have good grades
I qualified for a four-year, full-tuition scholarship at the University of Utah. But after my first year, I decided to transfer to Brigham Young University because it had better German and business programs.
When I got my acceptance letter, I learned that I qualified for only a half-tuition scholarship for two semesters. I was disappointed — but not for long. After two semesters, my grades were good enough that the university offered me a one-year, full-tuition academic scholarship.
I didn’t keep the scholarship for the rest of my time at college, but it made a big difference when I had it. So, if you didn’t get a scholarship out of high school, there’s still hope to earn one.
6. Federal student loans have limits
If you don’t have enough cash on hand to pay for tuition and other education-related expenses, federal student loans can help bridge the gap. But there are limits to federal student aid, and you might need to find other ways to cover your costs.
Paying for college can help you learn good financial habits
Paying for college can be a stressful experience, but learning how to do it right can prepare you for financial challenges in the future.
By following these tips, you’ll learn how to manage your money better. And the more you understand about money management, the easier it’ll be to avoid letting your money manage you when it matters most.
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