You’ve done it! You’re either in college or you’ve gotten your child to college. Either way, you deserve a pat on the back for all your hard work getting here. College expenses are vast and can be overwhelming.
When it comes to college budgeting, the most important piece is making sure your child is an important part of the conversation—if not the primary participant. They should be an active and responsible party in their finances and their education in order to have the most success at both.
When you sit down to talk about finances with your child, here are the major discussion points: expenses versus income. College has a lot of one and not very much of the other—we’ll let you figure out which. It’s important to understand them in depth and stick to a plan about both.
The biggest expense through all of college will be the education itself—financial aid is designed for class costs and room and board. But remember, you must refile for the FAFSA each year you want to use those funds.
The price of education spans more than tuition—it also includes school supplies, textbooks and electronics, which are a mainstream need in the current education system. The funds from a 529 Plan can often be put towards most of these, but you can also get a break by buying used textbooks at a fraction of the cost, and shopping sales for good or possibly refurbished electronics.
And though it may seem counter-intuitive to start paying against student loans before school is even over, any dent you can make in that debt can make a difference. Plus, it’s great to get into the habit of making small payments each month before they become necessary expenses.
Cost of Living
Throughout college, students have a plethora of housing options. The benefit to living on campus is that the rooms will most likely come furnished, with a laundry option and meal hall. Most of the campus living amenities are factored into tuition/room and board.
However, it’s common for older students to want to live off campus to exercise their independence. Off campus living has the potential to utilize a portion of your educational savings, but you’ll need to check with your financial advisor or professional for the exact parameters. Students living off campus will need furniture and a larger budget allotted for groceries and utilities, but the benefit is excellent preparation for life after college of managing budget, time and responsibility.
Another reality of college expenses is going out. Socializing is an enormous part of the college experience, and it should be intentionally budgeted for. You and your child can determine a reasonable number, but be sure to prioritize entertainment expenses as a part of the budget to teach financial discipline and decision-making skills.
For most students in today’s higher education system, their primary source of income is financial aid. It’s important to treat this as a source of income that has the same level of responsibility and expectation as a “job.” Because in its own way, scholarship maintenance is a job. Make sure your child understands the relationship between education and cost.
This will look different for your situation, but it’s an important conversation to have. For instance, if you’re paying for it, your child will need to understand that they’re an investment of yours. Whereas if they’re paying for it or taking out financial aid or utilizing scholarships, they need to understand the weight of that responsibility.
Explain that each time they opt to skip class or put minimal effort into an assignment, they’re throwing away money—either yours, theirs, or a donor’s—that they cannot get back.
If you and your child determine that they need a larger budget, perhaps for living off campus, make sure they can handle the balance of school work and a job on or off campus. Working while going to school can be challenging, but when the expectations of both are clear, it can be done.
The money made through a job at a campus bookstore or in a local restaurant can help fund “fun” money or could be enough to put towards savings or loan repayment later.
Internships, even (or maybe, especially) unpaid are a new necessity it seems. Many jobs in the American workforce request experience for even entry-level positions. What industry-specific internships lack in income, they make up for in networking and experience.
Connections are a new type of currency in the workforce, so while it may seem short-sighted to choose an unpaid internship over a paying server gig, the potential long-term payoff has a much greater opportunity. Students can start laying the groundwork for these opportunities by connecting with and participating in extracurriculars around their major.
It’s beneficial to revisit these topics on a yearly basis, to look at how expenses and needs change as your child’s college experience does. As long as the lines of communication are kept open, the financial future will remain much clearer for everyone involved.
The College and Career Planning team at CommunityAmerica Credit Union is a 2018 National Parenting Products Award winner. In addition to college planning help, CommunityAmerica provides a full suite of financial products, including checking, savings, mortgages and a variety of loan products to meet consumer and business needs. As a not-for-profit financial institution, CommunityAmerica offers highly competitive rates on deposits, loans, and fewer, lower or no fees at all. For more information, visit https://collegeroadmap.