By FPA member Jeanne Gibson Sullivan, CFP®
Last Updated: July 18, 2011
More than 2 million students will be entering college this fall. The following list contains some of the key financial basics for those students:
- How Much Will the Student Pay: Parents and children should discuss up front how much the student is expected to pay towards their education — whether it be all or a portion of their tuition, living expenses, books and spending money. Also, discuss how the student is expected fund their expenses — savings, summer earnings, work study during school and/or student loans.
- Budget: Often summer earnings need to last an entire school year; students should develop a budget for spending so they don’t run out of money by October!
- Pack Carefully for the Dorm Room: For those students who will live on campus, know what is allowed in the dorm. Don’t buy a microwave if they are not allowed. Be sure to find out if regular length or extra-long twin sheets are required. Coordinate with your roommate, so duplicate items are avoided. Also, find out in advance how to pay for services such as laundry, in case a roll of quarters should be brought.
- Watch Bank Fees: Students will often use the ATM closest to campus. If it is not the bank where your account is, they may be charged ATM fees, which will add up quickly. If money is spent too quickly and the account is overdrawn, you will be charged overdraft fees. Look for banks with a free ATM near the school. Students should closely monitor their account balances, online might be easiest for most students. Some banks have apps for students with smart phones, which make it easy to track their activity and balances.
- Be a Smart Consumer: College books are expensive. Students should explore whether they can purchase used books or rent books to save costs.
- Meals: If there is a choice of meal plans, carefully consider your eating habits. Also, students should limit vending machine purchases or convenience store snacks, which can add up quickly.
- Student Discounts: Many businesses have discounts for students. Be sure to ask or search the student newspaper or internet for local discounts.
- Credit Cards: Recent legal changes make it difficult for students under the age of 21 to obtain credit cards (unless they have a cosigner). If you have a credit card, use it very carefully and don’t buy what you can’t pay off when the bill arrives! Before this legislation was passed, according to a study by Sallie Mae, 84 percent of college students had a credit card, 82 percent of those carried a balance and seniors graduated with an average credit card debt of $4,100! That could take years to pay off.
While most parents and students anticipate completing college in four years, the six year college graduation rate is 55 percent, according to the National Center for Higher Education Management Systems! Thus, the most important financial tip for college students is to study hard, do well and try to graduate in four years!
FPA member Jeanne Gibson Sullivan, CFP®, is the founder and principal of Financially in Tune, a financial planning firm in Wakefield, MA and the parent of a college bound freshman.