By this point in the semester, students have received their financial aid refunds. Usually, if all of the expenses are covered, any money left over from a scholarship, grant, or student loan goes to the awarded student. Now, I have much to say about student loans, in general, but I will save that for another post. It won’t affect what they already have accepted for this semester. Still, there are some smart ways to handle refund money. Consider the following:
- Savings account: All college students need to have a checking/debit account as well as a savings account. If a student receives excess money in a semester, and he/she lives at home, then saving that money in an interest-bearing savings account may keep them from spending foolishly. If a student’s refund is the result of student loan usage, save any unused portion for emergencies like car repair.
- Pay off expenses: If students are in dormitories or live in apartments, putting rent money or money for utility bills aside can be beneficial. This way, there is less stress associated with how monthly expenses are being paid, and that energy can go towards academic improvement. Also, if that student has a part-time job, day-to-day things like groceries or gas in the car can be handled without compromising rent or utilities. Save any unused portion for emergencies.
- Repay student loans: This may seem like a stretch, but if a student has unsubsidized loans, interest is being compounded while that student is still enrolled. Subsidized loan interest begins post-graduation once the grace period ends. (I will talk more about this later.) If possible, save any unused portion, and while the interest on unsubsidized loans are small (between $1 -$20), pay it down and that will keep the loan amount from skyrocketing. (When you think about how much money is spent on unnecessary items, keep you student loans from inflating drastically is worth the $5, $10, or $20. The amount will decrease over time, and if you can keep it under $10, or even $5, then you won’t even miss that money.)
- Necessary purchases:
- Cars: If you need a car, it isn’t strange to use refund money to help with costs. Honestly, it’s not much different than a person getting a car loan. The interest on student loans can be lower than that of a car loan in some instances. If it is scholarship money, then you really have far less restrictions on money that you worked hard to earn. The problem here is that students often foreshadow too far. Instead pursuing a reliable, slightly used, rather inexpensive vehicle, they often go for the brand new car with all of the amenities. The logic is that the newer car will last longer and have more value. Yet, the payments are higher, as well as the insurance. Sometimes, the student’s focus shifts from academics to picking up more hours at work to help pay for the car. There are nice cars that may not be ideal for long road trips across country, but are great enough to get to school, work, library, etc. and last longer than one may think. Again, I am not saying one should buy a “lemon,” but use common sense and proper judgment.
- Clothes: In some cases, clothes are necessary, but proceed with extreme caution. If you need more clothes for work (i.e. dress codes, scrubs, etc.), or you may have gained or lost weight, buying clothes is necessary. But don’t go overboard just because something looks good. (I may elaborate on this topic some more in next week’s post.) Still, you should not need to spend thousands of dollars in refund money just to update a wardrobe. Buy only what you need and buy only after you have made sure you have all of your school supplies. Determine priority and buy pieces at a time. You can look neat without being broke.
- Living arrangements: I understand that room and board fees are what they are, and must be paid. But if you live in an apartment, or thinking about it, weigh everything carefully. You are just trying to live somewhere safe, that isn’t nasty, and meets your needs. Having a swimming pool, tennis court, or gym on site shouldn’t matter to you. That only increases fees or rent. Choose wisely so that if you must use refund money to cover costs, you are depleting your funds.