College Financial Planning – An Overview

Good College Financial Planning is the Bedrock of a Successful College Experience

College brings with it many new things. You’ll meet new people, learn new things about the world and your place in it, try new foods in an on-campus eatery, and maybe experiment with a new language or personal style. With all of the newness, comes a newfound necessity for financial planning. Regardless of whether you attend a state school or a private school, college is expensive and, without proper planning, you may find yourself short of money.

For many, college is the first time that they have to manage their expenses, pay bills, and plan out a budget. It is important that you begin your college career with a good understanding of your various sources of financial aid and other sources of income, and that you have a plan for how to meet your various expenses. In order to successfully complete your college degree, develop a budget and stick to it.

Step One: Understand Your Financial Aid Package 

The first step for developing your college financial plan is to thoroughly understand your financial aid package. Once you receive an acceptance from a school, you will also receive a financial aid package if you applied to receive aid.

Your financial aid package is the total amount of financial aid offered by the federal government, state government, and/or the school from which you received an acceptance. The school may offer you financial aid based on your demonstrated need and/or your demonstrated accomplishments. Your financial aid package details how much assistance you have from these various entities to help you cover the cost of attending school there and, consequently, how much it will cost you and/or your family for you to attend.

A financial aid package can be difficult to understand and often is presented using jargon you are probably not familiar with. Your financial aid may include any or all of the following:

  • Federal pell grant – Money from the federal government based on information provided on your FAFSA. This is a yearly reward so long as you renew your FAFSA and your financial situation doesn’t change drastically. This is a grant that does not need to be paid back.

  • Federal SEOG – Money that is given to schools from the federal government to give out to students with high demonstrated financial need. This is a renewable grant that does not need to be paid back.

  • Institutional grant/scholarship – This may be one or more of the items on your list of financial aid components. This is money given to you by the college/university. This could be scholarship money given to you because you have high demonstrated financial need. Or this could be scholarship money given to you for your merits (accomplishments, talents, test scores/GPA, leadership, and/or general impressiveness). This may or may not be renewable aid, so be sure to check the terms of the scholarship. This does not need to be paid back. This sort of funding may have been determined by the information you provided on the CSS profile, an application that some schools require students applying for financial aid to complete.

The difference in the amount of financial aid and the total cost of attendance is the amount of money that you are responsible for in order to afford to attend the institution in question. This gap in aid may be accounted for by some of the following:

  • Parent/guardian contribution – The amount that your parent(s)/guardian(s) are able to contribute towards your education.

  • Federal Loans – You may see one or more types of federal loans on your award, including subsidized, unsubsidized, and Parent Plus loans. There are many names that might preface “subsidized” and “unsubsidized” loans so be sure to research the particulars of the loan(s) you have been offered.

    • Subsidized loans are those that do not accrue interest while you are enrolled full-time in school.

    • Unsubsidized loans are those that begin to accrue interest while you are enrolled in school. They are less desirable than subsidized loans.

    • Parent Plus loans are loans offered to your parent(s) in order to help them contribute to your educational funds.

  • Work-study – You may be eligible for the federal work-study program. This is an estimate of how much you could make working part-time on-campus during your college career. Should this appear on your award letter, the amount is merely an estimate of what you might be able to pay towards your education if you were working an on-campus job.

  • Outside scholarships – You can apply outside scholarship awards towards covering part of your cost of attendance. Outside scholarships are any scholarships that are not given to you directly from a college or university. This includes local, regional, and national scholarships from individuals or organizations. Any extra money that you accumulate over the cost of attendance, you may be able to put towards personal expenses!

Lastly, not all costs of attendance are necessarily paid to the school itself. For example, if there are listed costs associated with “school supplies,” “books,” “personal expenses” and/or “travel expenses” these are estimates of what you might spend each year as a student on these things. They are intended to help you build a budget and make an informed decision as to whether you can afford to attend. It could be that your costs in these categories are substantially lower.

For example, most students buy used books, instead of purchasing them brand new from the university bookstore (where they are overpriced). This helps greatly reduce the estimated cost of your personal expenses. For used textbooks check out these websites: AbeBooks, Chegg, Thriftbooks, or Amazon.

Step Two: Estimate Your Expenses While in College 

In order to determine how much money you need to contribute towards your financial burden, you should estimate the total cost of your expenses each year.  Your expenses will be whatever sum of money needed for tuition, housing, food, monthly and other recurring bills, transportation, personal expenses, and any other expenses not covered by outside funding. That is all expenses not covered by grants from the federal government, financial aid received from the school you’re attending, outside scholarships, and any contributions from your parent(s)/guardian(s).

To begin to determine your expenses, ask yourself:

When estimating your expenses, it is better to estimate on the higher side since you never know what surprise expenses may arise. Once you have an estimate of your expenses throughout the year, you may find it helpful to map out which expenses are recurring (e.g., monthly bills or weekly personal expenses) and which are larger and less frequent (e.g., tuition payments). Visualizing your expenses this way will help you plan ahead for months with higher payment demands.

Step Three: Determine How to Cover Your Expenses

Now that you have an idea of the extent of your expenses, you should strategize how to cover them outside of any assistance you may receive from family members. While in college, you may meet your expenses by:

Working a job. You can work during the summer and/or part-time during the semester to earn cash. If you work full-time during the summer, this can be a great way to save up money for the coming school year. Additionally, many schools have on-campus jobs available to students at minimum wage during the school year. This allows you to work around your availability and, since you’re working on campus, the commute is short!

Applying for scholarships. There are scholarship opportunities year-round. Scholarships may be eligible to cover any tuition payments, school supplies, and, in some cases, personal expenses not directly related to school.

Taking out loans. If you have expenses that cannot be met by your working part-time or during the summer and/or if you are unable to work, you might consider taking out loans to cover your expenses. If you are able to choose between subsidized and unsubsidized loans through the federal government, choose subsidized loans so that you do not have to worry about interest accruing on your loan until six months after you graduate.

Step Four: Determining How to Spend Your Time to Meet Your Expenses

Some students insist on working part-time when they’re in school and full-time each summer in order to minimize the number of loans they take out throughout their undergraduate career. This is, however, not necessarily the best decision for every student. It all depends on what you value most during your college career. College is busy and, once you start trying to build out your daily schedule, you’ll find that you have to make hard decisions about how to spend your time outside of your academic commitments. Some students value graduating debt-free or near debt-free above all else. While others want to make the most of the opportunities available to them at college and value joining clubs, volunteering, conducting research, working as an intern to gain professional experience, and/or studying abroad over minimizing their post-college debt.

As of 2019, the average amount of loan debt for those who borrowed loans during their college career hovers above $28,000. This is a large amount of money for many of us. About a third of borrowers who graduate pay off their loan debt and any interest accrued within 12 years of graduating. Are these acceptable statistics to you? Or are they incredibly intimidating? It is up to you to decide how to best spend your time in college. It’s perfectly alright to work hard to minimize the number of loans you take out. It is also alright to let yourself take full advantage of all of the unpaid opportunities available to you during college. The best place for most working-class students is likely in the middle ground between these extremes: work some of the time, while also affording yourself the time to participate in other activities and experiences.

It is important to remember that opportunities such as participating in clubs, volunteering, conducting research, working as an intern, studying abroad, and other experiences can be just as valuable as a paycheck. It is these experiences that build out a resume, demonstrate leadership and commitment to community betterment, showcase professional skills and experiences, and suggest that one is a well-rounded individual ready to thrive in an increasingly multicultural and interconnected world. Having a resume filled with diverse experiences, skills, and interests will certainly help you secure a job down the road. Ultimately, your decision on how to spend your time is rooted in your balancing of short-term versus long-term financial planning. In any given moment, do you want greater financial stability now or do you want to have experiences that lead to greater financial stability in the future? Of course, part-time jobs in the present certainly lead to further work opportunities down the road. The distinction above short-term and long-term value above simply means to suggest that experiences outside of part-time work translate into capital down the road and should not be discounted in the present moment as not valuable for paying off debts.

Concluding Thoughts on Successful College Financial Planning

You now have all of the tools you need to create your college financial plan. Financial decisions made while in college can affect you for decades to come, so do not treat them lightly. Be intentional about how you spend your time and money and, most importantly, have fun and love to learn.

If you’d like to map out your financial plan and figure out your budget, download our College Financial Planning Sheet.

Anna Lenaker





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