Thinking ahead: budgeting for college expenses

thinking aheadIf you have a good handle on your exact expenses, then your life will be a lot easier. Start by contacting your school and getting estimates on what it will cost to attend. Colleges generally compute a figure that includes more than just tuition and fees, taking into account costs such as textbooks, materials, housing and food. Unless you attend a campus that does not provide residence halls, there are usually two different sets of expenses for on-campus and off-campus students. The financial-aid office at your school determines the amount of financial aid you will be awarded based on the predetermined college expenses minus your expected family contribution (EFC).

Budget for College Expenses

Students shouldn’t make the mistake of not including all of their college expenses when they figure out how much school will cost. While the college will determine a standard cost of attendance, your needs may actually be higher. For example, you may need to figure in the cost of child care or a higher cost of materials in your program of study. To accurately determine how much money you’ll need to borrow to cover the overall cost of a college education, look at all of the factors that may have an impact on the bottom line.

Choose a Less Expensive School

The cost of attendance at your college will determine how much money you need to borrow. Enrolling at a pricey school when you know you can’t afford the expense could leave you deep in debt just after the first year. However, some private schools have excellent financial aid options and can – depending on your circumstances – be less expensive than schools with lower price tags. To keep you from getting in over your head quickly, consider starting your college education at a less expensive school. For example, a community college can provide a good foundation for the first two years at a significantly lower cost. Most universities have agreements with a number of community colleges that allow the credit a student earns during the first two years to transfer. This could lower the overall cost of your education and still allow you to get your degree at the university of your choice.

Simplify Expenses to Go Back to School

With a little planning any student can establish a good financial situation before going to college. If you already have credit card debt, you should try to get this paid off before you arrive on campus. In addition, you should simplify your other financial obligations by downsizing where possible. Try to lower your rent or reduce your monthly car payments. If you are attending school on a full-time basis, then you probably won’t have much income during that period. While you can get student loans and other financial aid to help you pay your expenses, you don’t want to be in a situation where you are making monthly payments on credit cards or a car with your loan funds. This will just get you deeper in debt. Be smart and simplify your financial obligations now.

Know the Impact of College on the Family Budget

Whether you are going to college or sending your kid off to school, the cost associated with higher education is substantial for most families and can have a huge impact on the family budget. You may be able to ease this financial burden by applying for federal financial aid. Completing the Free Application for Federal Student Aid (FAFSA) won’t take nearly as much time as you might spend doing your taxes. Using this one form, your income, assets and other family information is taken into consideration to determine your financial need. You may not realize that you are qualified to receive financial aid such as student loans or grants. Even if you later find that you don’t qualify for aid, you haven’t lost anything by trying.

Know Your Expected Contribution to the Cost of College

bank loansThe amount you need to borrow to cover the cost of your college education may vary based on the amount the federal government says you can pay and, in reality, how much you have available. Using the information provided in your Free Application for Federal Student Aid (FAFSA), the government determines your expected contribution. That amount is then subtracted from the cost of attendance at your school. The remaining amount is considered your financial need. Your college will determine your financial aid package based on the financial information it receives from you in the FAFSA. On top of subsidized loan funds, your college may also offer you additional funds through unsubsidized loans in order to cover the amount you are expected to contribute. You can accept the entire package as presented by your financial aid office, or reject parts of it. The choice is yours. Of course, remember that the more you borrow, the more you will need to repay later.

Control Your Student Loan Debt

For every year that you are in college and receive a student loan, take the time to review how much you are accumulating in total debt. Many students don’t do this and simply review the financial aid package they are awarded from year to year. This is especially true with student loans that do not require repayment until you leave college. However, all debts that you accrue while completing your education have to be repaid soon after you graduate (or drop below a half-time status). Your projected monthly student loan payment should be figured into your post-college budget.

Help with College Expenses with Work-Study

Determining how you will make ends meet to cover your college expenses can be quite a challenge. Many students turn to part-time jobs to help cover these costs. Fortunately, the U.S government offers financial assistance through federal work-study jobs that are available only to students. Taking advantage of work study can help you reduce the overall amount of your student loan debt.

Don’t Let Credit Cards Control Your College Life

All over college campuses you’re just as likely to see tons of ads offering credit cards for students as you are to see ivy on the buildings. Be careful that you do not fall into the credit card trap. Obtaining a credit card can be a great way to establish your credit history–when handled appropriately. Know the terms of the credit agreement before you apply. This includes understanding the interest rate and repayment conditions. When you use your credit card to make a purchase, do not charge more than you can afford to pay off when that bill comes next month. If you buy a big-ticket item and plan to make monthly payments until it is paid off, then be sure to add that monthly payment into your budget. With careful planning, you can establish an excellent credit history without falling victim to huge credit card debt.

 

Saving for College