Financial Planning for College Students: How to Pay for College

Money SmartsJanuary 9, 2024

Going to college is an exciting time in any student’s life, but figuring out how to pay for college costs can be daunting. Fortunately, there are many planning resources available to help you start your college career on the right financial foot.

Read on to learn how to pay for college, and how to budget for college expenses.

How to Evaluate the Cost of College

College costs include more than just tuition. You also must consider the cost of books, supplies, room and board fees, meal plans, club fees, transportation, and any technology you’ll need for class such as a laptop or tablet. Compare the costs of specific colleges by visiting the College Scorecard website provided by the U.S. Department of Education.

You should also budget for emergency expenses. What if your car breaks down? How would you pay for an unexpected hospital bill? These are just a few costs to keep in mind.

Financial Planning for College Students

Once you’ve determined your college-related costs, start creating your college financial plan. Here are three key steps to take when developing your plan:

• Identify your goals and values. Consider what you’d like to achieve and what is most important to you. For example, if participating in a fraternity or sorority is a priority, then you’ll have to set aside money for dues and fees you may be charged. Additionally, if you’d like to live off-campus, weigh the cost against the on-campus housing options available to you.

• Assess your financial situation. What’s financially important to you today may change tomorrow. It’s important to keep an eye on your spending and assess your budget to accomplish your goals.

• Make adjustments. Your college spending plan should be a “live document.” This means that you should regularly review your budget and adjust it as your expenses change.

Budgeting Tips for College Students

Creating a college financial plan and tracking your income and expenses will set you up for success. Here’s how you can create a budget:

• Keep track of your cashflow. Look at how much money you have coming in per month, and how much money is going out. This will help determine if you need to adjust your spending plan.

• Document your expenses. Write down your expenses. Keep in mind that there are four different types of expenses, including:
  • Regular-fixed: These are recurring expenses that don’t change month-to-month. Examples include rent and car payments.
  • Regular-variable: These are recurring expenses that change month-to-month. These costs include certain utility bills (gas and electric, for example), gas for your car, and your phone bill.
  • Irregular-expected: These are infrequent fixed expenses. Examples include tuition and certain fees.
  • Irregular-unexpected: These are infrequent variable expenses. Examples include bills for emergency medical treatment and car repairs.
• Collect bills and receipts to track your expected expenses. Keep receipts when you pay your bills each month. That way, you’ll know exactly how much each bill costs and you won’t have to guess the amount.
  
  
• Estimate the expenses you’re unable to track. Set aside money each month to cover unexpected expenses. A good budgeting rule is to save 20% of your monthly income.
  
  
• Consider your habits and attitude. Examine how you spend your money, and how you feel about your monthly budget. Does your budget help you reach your goals, or is your spending holding you back?

What Is Financial Aid?

Financial aid is money you receive to pay for college. You can apply for financial aid to pay for costs not covered by either yourself or your family. Financial aid includes grants, scholarships, work study, and student loans.

Gift aid such as scholarships and grants are funds you can receive to pay for school that you don’t have to repay. Self-help aid such as student loans are funds you must repay.

You can get financial aid from a variety of sources, including:

• The federal government. Filling out the Free Application for Federal Student Aid (FAFSA) is the first step to apply for aid from the government. This includes federal student loans and the Pell Grant.
  
  
• Your state government. The FAFSA also allows you to apply for aid from your state government. In Illinois, this includes the MAP Grant.

• Institutions. Colleges you apply to may award scholarships or grants to fund your education.

• Outside sources. Institutions and organizations outside of your college can help fund your education through scholarships or grants.

• Private sources. You can also receive financial aid from private sources, including credit union student loans and loans from other financial institutions.

Before taking out any student loans, make sure you understand where the loan is coming from, the interest rate, whether the loan is subsidized or unsubsidized, the repayment options, and the grace period.

Meeting Your Financial and Educational Goals

While the cost of college can be intimidating, there are financing options to help make your college dreams a reality. Whether it’s through scholarships, federal financial aid, or private student loans, making informed financial decisions is a key step in achieving your educational goals. And with a college financial plan and budget in hand, you’ll be setting yourself up for success in the long run.

As a not-for-profit credit union, GLCU empowers its members through community giveback programs, financial education, volunteerism, and competitive interest rates. Learn more about our scholarships and student loans, and check out our college resource center.

This blog was adapted from a webinar hosted by the GLCU Foundation for Financial Empowerment and the Illinois Student Assistance Commission (ISAC). Check out the full webinar to learn more about this topic.

If you or someone you know needs help with college financial planning, contact us.

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