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 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 one’s financial responsibilities and planning ways to pay for expenses can help reduce stress. In this section, we identify common personal expenses, sources of income, and explore steps for creating financial goals.

Expenses

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 other 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. Some are more expensive, like tuition, while others are less pricey but still important, like books and food. The following list describes basic expenses associated with college:

• Tuition: This includes the price for attending an institution. Students pay relatively more or less for this based on where they’re going to school and how many credits they’re taking.
• Room and board: These are essentially “food and shelter” costs. Many college students live in a dorm and eat their meals on campus. Students who live off campus will have to pay for comparable things, like renting an apartment and buying their own groceries.
• Books and supplies: These include books for classes and supplies like notebooks, writing utensils, and calculators. Textbooks are often very expensive, so many students try to find used textbooks for sale.
• Personal needs: Regardless of where students live, they typically need money for things like laundry, cell phones, computers, and going out with friends. This expense can vary a lot depending on personal preferences. For instance, some students may prefer to make their own meals while others may prioritize eating out.
• Transportation: Students who commute by car or need to drive to off-campus activities will need to consider the price of car insurance, maintenance, and gas. Students who attend college in more urban areas may also have public-transportation expenses.

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.

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 don’t 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’re taking a full academic load. Depending on your circumstances, it’s 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 up front if you don’t 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 won’t 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’s important to find the right ones for you.

Now that we’ve learned about different types of income (scholarships, work, loans) and different costs (tuition, class supplies, costs of living) students may have, take a moment to reflect on your own financial situation. Can you think of any ways to improve your spending habits?

Take a look at the following activity, in which we’ll look at three college students and the financial decisions they made in order to be able to afford their education.