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.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.06% – 13.06%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.25% – 11.10%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|5.62% – 10.01%7||Undergraduate and Graduate|
|3.93% – 9.81%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|