College Personal Finance 101 Course
Section 1: Introduction
Starting college is one of the most exhilarating times in a young adult's life. If you are one of these people, be ready to meet hundreds of new people and experience more freedom than you ever have before. While they say college is the best 4 years of your life, it is also one of the easiest times to make mistakes--academically, personally, and financially.
All too often there are stories of people failing out of college or developing drinking or drug problems. Though these should both be seriously considered, people often overlook the importance of personal finances when it comes to attending college.
Usually high school students constantly have their parents overlooking their bank accounts and offering suggestions (or demands) about managing money. When you move out of your parents’ house and into that cramped college dorm, however, it is much more tempting to spend unwisely and lose track of how much money you really have.
If you are about to graduate high school and enter into your freshman year of college, congratulations! You are about to embark on one of the most exciting, memorable, and life-changing experiences of your life. It is crucial, however, to keep track of your finances while you make your way along this journey. If you do, you will not only be able to graduate in good financial standing, but also will be able to have a more fun and stress-free college career.
Why We Created This Course
Here at LendEDU, one of our goals is to educate those that will soon become the backbone of our nation in the areas where typical high school classes do not. As recent college graduates ourselves, we know firsthand about managing finances while in school. We have already learned many lesson from our financial mistakes in college, and we decided to make this guide so you don’t have to.
In the following sections we will go over what expenses you should expect in college, how to save money in dealing with them, and other tips that will benefit you well into your future. If you ever have questions or need advice, feel free to contact us and we will be happy to help!
Section 2: Mandatory Expenses in College
Introduction: Tuition and Room & Board
While you are in college there are certain expenses that you just can’t avoid. This of course includes the obvious things like tuition and room and board. If you want to learn more about how to best pay for these inevitable expenses, check out our Financial Aid, Scholarships, & Student Loans 101 Course and our Searching for Scholarships 101 Video Course. Both of these go in-depth on what your options for financing your education is and how to best go about it.
In short, tuition is what the college actually charges for classes. Tuition varies greatly from school to school and should be weighed heavily when deciding on what school to attend. Room and board is what the college charges you for housing and food. Some colleges require students to live on campus while others may only require it for a certain amount of time or not at all. The cost of living for your dorm is an example of something that room and board covers.
Aside from tuition and room and board, there are also many other things you will almost inevitably have to pay for. Each section below will go more in-depth into these topics.
The first one to consider is your books. I’m sure you have heard rumors about the ridiculous prices of college textbooks; believe them. They are 100% real. New textbooks can cost anywhere from $100 to $800 and used ones aren’t much cheaper. There are, however, a few ways you can save big on your books, and these savings could add up to thousands of dollars over your entire college career. We will go over some of the tips below:
Buy books off upperclassmen - Chances are that there are hundreds, if not thousands, of kids who have purchased the book your class requires. Reach out to upperclassmen in your major and see if they still have the book. The bookstore probably gave them a lowball offer when they tried to resell it and will be happy to accept your $50 (or whatever you offer) to take it off their hands.
Purchase or rent books online - Many colleges use the same textbooks for their classes. There are countless websites online that re-sell textbooks for a fraction of the cost. Be sure to check these out before shelling out a few hundred for something you could get for much less. Some of our favorites here at LendEDU are Amazon and BookRenter.
Buy older editions - Book stores are constantly updating to the newest editions to try to dampen the resell value of textbooks to prevent some of the strategies mentioned above. In reality, however, most of these new textbooks only have a few new pictures or rearranged sections. Try and find an older edition and compare it to the current one. If they are similar, save some money and go with the older edition.
Another expense of college is a laptop. While it is probably possible to make it through your four years without one, we don’t recommend it. Constantly having to use a library computer and saving everything to an external storage device is a huge hassle - not to mention that you would have to record all your notes by hand. If you don’t have a laptop yet, be sure to check out what deals your school offers. Many will offer huge discounts on new tech. In addition, both Apple and Microsoft provide discounts for students entering college.
Everyone learns in first grade that one of the basic essentials of life is food. Most colleges have a simple solution to feed thousands of students everyday. Dining halls! If you have never been to one, you are in for a treat (or maybe not depending on your school and your pickiness). Some colleges even require that you purchase a meal plan freshman year. Whether this is the case or not, if you have a meal plan, don’t let it go to waste!
Most colleges have at least one buffet-style dining hall which allows you to eat unlimited amounts of food. When you attend college, be sure to take advantage of these. Try to avoid eating out as much as possible and make sure you get your money’s worth when you go to the dining hall. If you need some extra snacks for your dorm, take some extra food from the dining hall to snack on later (only if it’s allowed of course….!)
Furnishing Your Dorm
Some dorms will come with a bed and maybe a desk or dresser, but most definitely aren’t fully furnished and ready to live in. This will be the place you will live in for at least the next year, so it has to somewhat cozy. Coziness doesn’t have to come with a high price tag though!
Whether you want a mini fridge, a couch (if you can fit one), or a TV, don’t pay the full-price for a new one. Hit up your aunts and uncles, old cousins, and even your grandma to see if they have anything they would be willing to donate to your dorm room. Alternatively, check out the local thrift shop and Craigslist to see if you uncover any gems. Make sure to coordinate with your roommate so you don’t purchase anything twice and so you have double the amount of relatives to annoy!
Section 3: Other Expenses in College
The above things are requirements - you usually have to pay for them somehow no matter what. There are, however, countless other things that you can and will spend your money on while in college. In this section we will identify these things and explain the best ways to save money on them.
Events for Entertainment
When you go to college, you will have a smorgasbord of options when it comes to entertainment and what you do for fun. One of the great things about universities is that they generally provide free activities around the clock to keep you entertained. No matter how many movies portray college as solely studying and drinking, there are tons of other ways you can spend your time.
Some of these include free movie or game nights, intramural sports, or random games, such as capture the flag, on campus. Take advantage of these free events as much as possible. Not only can you save money, but you can also meet new people and make lifelong friends. One good place to start for freshmen is to ask your Resident Hall Advisor, or RA, for some ideas for events to go to.
There are sure to be times when you’ve had a long day studying and you just want to relax in your dorm alone or with a few friends. Whether you choose to spend your time watching movies, playing video games, listening to music, or something else - you can do so for next to nothing if you’re smart about it. Look for student discounts on any service you pay for. Many companies realize the struggle of being a college student and will slash prices to make their services more attractive.
Many entertainment companies offer hefty discounts for college students. You can sign up for free for Amazon Prime for 6 months and receive 50% off after that. Prime lets you stream thousands of movies that will keep you and your dorm buddies entertained for hours (not to mention that free 2 day shipping!)
Another popular service that students can get at a discount is Spotify. You can stream all of the music you want, whether you are getting ready to go out or studying, for just $4.99 a month. If you often purchase music, a streaming service can really cut down on your costs and save you money.
Clubs & Organizations
One of the best ways to meet new people at college is by joining different clubs and organizations. Chances are that there is at least one club for each of your interests. Many of these are completely free and receive funding for events from the school, while others require dues for membership.
Greek life organizations usually come with hefty dues--ranging anywhere from $100 to $2,000 depending on the fraternity or sorority and the school. If you join one, be sure to apply for scholarships that help pay for dues or tuition from the national organization. Another example of clubs that require dues are club sports teams. The costs typically cover equipment, travel, and field time. Though these groups may seem expensive, be sure to consider how much you get out of it. For example, joining a fraternity or sorority may require a hefty fee at first, but you will gain free admittance to events and, therefore, may not have to pay for entertainment later on.
If you do not have the funds to pay for an organization such as those mentioned above, don’t fret! There are tons of clubs and organizations that are completely free and there is sure to be one fits your interests. Check out your school’s website for a list of clubs and organizations and check them out!
Parking & Transportation
When you jam pack thousands of students into a college town, parking can be very difficult to find--and expensive! If you have a car on campus, there are ways to save money and get around the ridiculous prices of parking passes.
First off, many parking lots of garages are specifically for long-term storage. If you do not have to drive much (perhaps only to go home every few months), consider putting your car in one of these and using a bike or the school’s busing system to get around.
Alternatively, ask an upperclassman with a house if you can buy a parking spot off of them. Some passes may cost over a $1,000 a year. Most upperclassmen would be happy to take a few hundred dollars in exchange for space in their lots that they would never use anyway. If you don’t have a car on campus, see if your school has a ride-sharing program. You may be able to hitch a ride with someone driving home in the next town over. This will be much cheaper than paying for a train ride or an Uber.
Section 4: Creating a Budget in College
Hopefully you have a better idea of what expenses you may have in college. The next step is to come up with a plan to deal with these expenses. One of the best ways to do this is by creating a budget.
Simply put, a budget is a way to keep track of what money you have available, where you are spending it, and how much you are saving it. If you have created a budget for college, be sure to look at it throughout the semester and constantly update it. As time goes on you’ll learn more about what expenses you have and should continually incorporate these in your budget. Below we will go over the steps to creating your college budget.
Step 1 - Calculate Income
The first step to your budget is to calculate what money you have coming in. This doesn’t have to be just from a job and may include the following:
Income from jobs
Money that your parents give you (if you’re lucky!)
Student loan disbursements
Money from scholarships
Step 2 - Calculate Expenses
Calculate every expense you have. This part might be a little harder than figuring out income. Include anything that you have to pay for yourself. This may include the variety of things mentioned above and anything else that you have to pay for. If you join a new club or team that requires dues, be sure to update your budget so you can plan accordingly.
Step 3 - Calculate Debt
Today 7 out of 10 graduates have some form of student loan debt. If you are one of these unlucky people, make sure to include this and any other form of debt, such as that from credit cards, in your budget. Though you may not be required to make payments on your student loans until after graduation, you may decide to make payments on your interest while in college (more on this to come!)
Step 4 - Calculate Savings
The next step is to calculate how much you currently have in savings and decide if you want to use this money or try to keep it in savings. Many students save up money in high school so they have spending money in college. In this case, you may not put any additional money into your savings but should calculate how much you have to spend each month.
If you have a job or another substantial form of income, you may decide to put money towards growing your savings account. Whatever the case is, calculate how much you have in savings and how much you can afford to take out or add in each month. It is smart to put some money aside in the case of emergencies in case you find that you need some extra money for an unexpected expense.
Step 5 - Balance Your Budget (Video)
So you have mapped out what money you have coming in, what money you think will be going out, and what debt and savings you currently have. The last step is to balance your budget. Take away your expenses from your income and savings and see if you have enough money to cover your various costs for each month. If you don’t, see what expenses you can cut out. These should always be non-essential things such as eating out or entertainment costs.
If you find that you have extra money once you balance your budget, you don’t have to spend it all! Consider saving it for the next big purchase you want to make or for something like a spring break trip. There are tons of phone apps out there, like Mint, that help you track your spending and budget. Using these can take much of the leg work out of budgeting and they will even send you alerts if you are spending too much.
Keeping track of a budget may seem like overkill to many college students. It might seem stressful and time-consuming to watch your spending, but it truly can benefit you in the long-run. For a few minutes a week, you can ensure that you will never have to sit in your dorm room all week eating ramen because you lost track of your money and have none left.
Section 5: Using a Checking Account
While you were in high school you may have never managed your own checking account. Maybe you had one with your name on it but your parents really controlled it all. As you move towards into your adult life, you will eventually have to start managing your own account, and college is a great time to start. Below we will go over some of the basics of your college checking account.
Choosing and Opening a Checking Account
There are tons of options when it comes to opening up a checking account. As a college student, your best bet is to choose one specifically geared towards college students! Many of these will give you discounts and benefits that make managing the account while on a college campus easier.
Some things to consider when choosing include what fees and limits come with the account. Many colleges also have their own branches on-campus. If your college has partnered with a bank, using them for your checking account may make your life way easier. These ATMs will be all over campus and you won’t have to ever travel to take money out.
To open a checking account, visit the branch of whatever bank you choose to sign up. Generally, in order to open an account, you will need an initial deposit, two forms of identification, and basic information such as Social Security number and home address. If you are approved you will receive a debit card that allows you to make payments and withdraw money.
Using Your Checking Account
Once you have opened up a checking account, it’s time to use it! You can deposit and withdraw money, keep track of your activity, and write checks from your account. Most banks nowadays have online tracking systems that allow you to see what payments you’ve made and to where and what money was deposited into your account. Make sure to monitor your account for purchases you didn’t make or incorrect charges.
After you have some money in your checking account you can withdraw money from ATMs using your debit card. While you typically can take money out of any ATM, you should be aware of fees for using other bank’s ATMs. Usually the bank whose ATM it is will charge you a few dollars as well as your own bank. It may not seem like much, but these fees add up fast, especially if you consistently use a different ATM. We recommend learning where your bank’s ATMs are and only using them.
Benefits of a Checking Account
Using a checking account has many benefits that you might not have previously considered. First off, you can often deposit checks and transfer money right from your phone using your bank’s app or website. This is much more convenient than going into a bank every time.
Another great benefit of having a checking account is that you can set up automatic payments. If you have student loans, for example, you can have your payment automatically deducted from your account each month. Not only does this ensure that you won’t miss any payments, you usually also receive a interest rate discount.
The last great benefit that we will go over is the ability to make unlimited transactions. Unlike a savings account, which often limits the amount of times you can withdraw or transfer money, checking accounts usually have no limits. You can take out and spend your money as you choose, without having to worry about pesky fees.
Section 6: Building Credit
Once you enter college, believe it or not, you are not to far away from having to make some big purchases that require financing. Whether this be a car or house or something else, you will only be approved for a loan if you have good credit. College is a great time to start building your credit so when you graduate you can already have some established. Once you are considered creditworthy, you will receive lower rates on loans which will result in tons of savings.
How to Start Building Credit
The first step to building your credit is to sign up for a credit card. As a college student, it is usually best to apply for a college credit card. These usually have higher acceptance rates and have great benefits and rewards geared towards college students. In turn, these cards often have higher interest rates. Furthermore, those under 21 may need to have a cosigner to be approved. A cosigner shares the responsibility of paying back debt and will be negatively affected, along with the primary user, if payments are continually missed.
Tips for Building Credit
Once you have your credit score, there are some things you can do to ensure that you are building your credit while saving money. First off, charge only as much as you can afford to your credit card. If you do this, you will be able to pay off your balance in full, helping you avoid paying interest on your balance.
It is also very important to make your payments on time. If you often make late payments or miss them repeatedly, you will be reported to the credit bureau and your credit score will drop.
The last tip is to make sure you don’t max out your credit card. Creditors look at your account and see how responsible you are with taking on debt. If you continually max out your credit card, they will see you as irresponsible. The widely accepted rule of thumb is to use around 30% of your max allowance. This means if you are given a $1,000 limit, try to spend no more than $300.
Why Credit Matters
If you decide to use a credit card, be sure to use it responsibly. It is way easier to ruin your credit than it is to build it up.
If you have a poor credit history you will often not be eligible for many things and will receive higher interest rates if you are. This includes getting loans to purchase cars, mortgages for homes, and much more. Furthermore, if you have bad credit you will not be eligible for student loan refinancing (more on this to come) which can save you thousands.
Keep track of your spending and make sure not to miss any payments. The credit bureau receives regular updates about how well you are doing in repaying your debt. As long as you don't miss to many payments and make them on time, you should be able to continually build your credit. Building credit while in college is a great way to set yourself up for financial success after you graduate.
Section 7: Student Loans
If you had to took out student loans to help finance your education, it is crucial that you know the ins and outs of them. This will help ensure that you have the highest chance of successful repayment and that you don’t make the process harder than needed. A recent survey we conducted has shown that most college students know nothing about their student loans. You can watch the accompanying video to the right. If you are borrowing thousands, or even tens of thousands, of dollars to finance your education, you better know everything about them. Student loan debt can affect you well into your future and should be taken seriously.
Student Loans 101
Though we have an extensive video course that talks about student loans, we will give you the quick rundown here. They can be used to cover the entire costs of college - including tuition, room and board, books, technology, and other expenses. Also, there are two types of student loans: federal and private.
Federal Student Loans - If you took out a loan by filling out the FAFSA, then you have a federal student loan. These loans are issued by the government and typically have lower interest rates than private student loans. There are general types of federal student loans: subsidized and unsubsidized. The government pays the interest on subsidized loans while you are in college. Unsubsidized loans, on the other hand, accrue interest while you are in college. It is important to know what you have so you can plan accordingly. Lastly, federal student loans always have a fixed interest rate. This means that your rate will stay the same over the life of your loan.
Private Student Loans - These loans are offered by private banks or lenders. Usually, you will only take out these loans once you have exhausted all of your federal options. Unlike federal loans, these are issued based on creditworthiness and in most cases require a cosigner. Furthermore, because the lender is taking a risk giving a loan to someone with no job or promise of a job in the future, the interest rates are typically higher. Private student loans may require full payments while in school, interest-only payments, or will allow students to defer payment until after graduation. It is important to know, however, that in the majority of cases interest will accrue while you are in school. Private student loans may have a fixed interest rate or variable interest rate. Unlike fixed rates, variable rates fluctuate with the market, and may go up or down throughout the life of the loan.
Paying Interest While in School
The best thing you can do to save money on your loans while in school is to pay the accrued interest. If you have an unsubsidized federal loan or a private loan, your principal balance while grow while you are in school based on your interest rate. If you make no payments towards the interest, each subsequent amount of interest that is charged will be greater due to the higher total balance.
We suggest putting whatever extra money you have towards your interest. Calculate how much interest you are charged each month and try set aside enough money to cover it each month. This can result to thousands in savings over the life of your loan. Talk to your loan servicer (the company who collect your payments and helps you if you run into trouble) and see if you can set up an automatic payment for your accrued interest.
Other Tips for Managing Student Loans
Aside from paying the accrued interest while in school, there are many other things you can do to save on your student loan repayment, which we will go over below.
Only Borrower What You Need. This one is simple. Know how much you need to cover your expenses sand only borrow that much. As you take out more money, more interest will be charged, and you will have to pay back more. Borrow what you need and only what you need.
Only Spend on Essentials. This goes right along with the above point. It is crucial that you only spend your student loans on essentials. This includes tuition, books, housing, and other strictly school-related things.
Come Up With a Plan for Repayment. While this may seem obvious, not many people do it. If you take out student loans, you need to have a plan to repay them. Try to project how much money you will have after graduation and decide how much you can afford to put towards your student loans. Set a goal for when you want to have your debt paid off and figure out how you are going to accomplish it.
Refinancing and Consolidation (Video)
Though you might not have to start repaying your loans for four years, it is never too early to learn about ways to save money on them. Arguably the best way is to refinance your student loans once you have obtained a secure job and have established credit. When you refinance your student loans, a new private lender pays off your old loans and gives you a new one with a new interest rate or new repayment term. Graduates with steady jobs are seen as more creditworthy as compared to student in college. For this reason, lenders are often able to provide lower interest rates which, in turn, save you money. You can also consolidate multiple federal and private student loans together into one loan that makes it much easier to repay.
Section 8: Making Money in College
Everyone knows that college is expensive. Even if you and your parents have saved your whole life, you may not be able to afford the myriad of costs that accompany getting a higher education. You could try and take out student loans to cover everything, but this will come back to haunt you in your later life. In the following sections we will go over some easy ways to make money while in college so you can avoid taking on too much debt.
Get a Local Job
College towns are always surrounded by tons of restaurants and shops that are looking to hire students. Consider getting a simple job with flexible hours so you can make some money each week. You could be a waiter or waitress, work at a convenience store like Walgreens, or deliver food for a company like Zoomer. Many local shops and restaurants understand that you have a busy schedule and will let you work only a few hours a week. In addition, there are usually many other students working so there is a good chance you can find someone to cover for you if you need some extra time to study.
Find a Job On Campus
Your college surely has tons of jobs for students. Some of these may be work-study programs. A portion of the money you make from these goes to paying for your education while the other half goes to your bank account for you to spend as you choose. Whether you choose a work-study program or a traditional on-campus job, you can make decent money through working only when is convenient for you. Some examples of on-campus jobs include working at the library help desk, at your school’s fitness center, or in the financial aid office.
There are tons of websites out there that allow individuals to apply as contractors for a variety of jobs. The most popular is Upwork (formerly Elance). This site, and other related sites, let you sign up for work ranging from writing to photography to programming. If you have a special skill, search for some relevant jobs and apply for them. You can work remotely from the comfort of your dorm or the library and make some great money.
Section 9: Final Thoughts
You're On Your Way!
If you are about to enter college, you are probably experiencing a wide range of emotions. You may be excited, nervous, or overwhelmed for a variety of reasons. College is a time when many people “find themselves” and grow as an individual. It is a place where people find lifelong friends, future spouses, and where people decide what they want to do with the rest of their lives. You will experience things you never have before and never will again. There will be tons of fun times as well as some difficult times.
Though money is important in college, it doesn’t have to stress you out. If you take the time to plan your finances, create a budget (and stick to it), and are smart with your money, you can succeed financially. If you ever need advice from people who were just recently in your shoes (and wish they still were) and understands finances in college, don’t hesitate to contact us. We want to see you succeed and will help in any way we can.