62 Finances in College

David Evans


What you’ll learn to do: describe factors for finances in college including student expenses, financial aid, and financial decision making

Open palm holding miniature dollar bills

The cost of college should never discourage anyone from going after a valuable degree.

–Arne Duncan, former United States Secretary of Education

By the end of this section, you will be able to identify sources of major and minor expenses in your life when attending college. You will explore sources of financial assistance and strategies for applying for financial aid. You will also explore federal grants and scholarships as financial aid support for college and factors in borrowing and repaying student loan debt. In addition, you will be able to explain strategies for financial decision-making and goal setting for your college education.

College Expenses

Learning Outcomes

  • Identify sources of major and minor expenses in your life when attending college

College students often have money concerns, such as affording college while still paying other bills. These concerns can affect their academic success. For instance, money problems are stressful and can prevent students from concentrating on their studies. Or, if students have a lot of personal expenses, they may try to work more hours to cover costs of living, leaving them with less time to study. Worse yet, some money problems, such as extreme debt, may cause students to drop out of college entirely. Analyzing one’s financial responsibilities and planning ways to pay for expenses can help reduce this stress.

Identifying Expenses

College students are diverse and may be in different stages of their lives. For example, some students may have just graduated from high school, other students may be mid-career, and some students may have families while others are only financially responsible for themselves. While these differences will certainly have an impact on your financial responsibilities, there are certain financial obligations most college students have to pay for.

an efficiency apartment
College students are often aware of room and board expenses, but may forget to factor in the cost of necessities like furniture, kitchen appliances, and other household items for their dorms or apartments.

Usually, when people hear the term college costs, they think of tuition and room and board. Unfortunately, those costs are only part of the picture. The real cost of college includes a much wider list of expenses, such as the ones below.


This includes the price for attending an institution. Students pay relatively more or less for this based on where they’re going to school, the type of institution (Public or Private) and how many credits they’re taking. For the 2022-2023 School Year, tuition rates at FSW are as follows: In-State: $113.36 per credit hour, Out-of-State: $432.63 per credit hour (FSW Financial Aid).


Academic programs may have additional fees beyond tuition costs. For example, a student majoring in culinary arts will need specialized tools to participate in that program. Services the college provides to students can have associated fees. For example, a student health center may have a basic fee that all students must pay whether they use the service or not. Some colleges have dining fees that give students food cards to use on campus. Student fees are not fees students can opt out of. It is important for students to examine a college’s fee structure and maximize the services that are being paid for by fees.

Books and Supplies

These include books for classes and supplies like notebooks, writing utensils, and calculators. Textbooks are often very expensive, so many students try to find used textbooks for sale. For the 2022-2023 School Year at FSW books and supplies are estimated to cost $2,087 (FSW Financial Aid).

In order to save students money on textbooks, a recent Florida statute (Rule 6A-14.092) requires colleges to choose the highest quality textbooks available at the lowest price possible. This has encouraged many institutions, including FSW, to switch to Open Educational Resources or OERs for many courses. This Cornerstone Experience textbook is an example of an OER textbook. When browsing for courses in the Schedule Search page, students can now filter their searches by textbook cost. Choosing the “Zero Textbook Cost” option from the drop-down menu will display courses that use textbooks that are completely free for students.


Students who commute by car or need to drive to off-campus activities will need to consider the price of car insurance, maintenance, and gas. Students who attend college in more urban areas may also have public-transportation expenses. For the 2022-2023 School Year, the estimated transportation costs at FSW are as follows: At Home: $2,647, On Campus: $1,324 and Off Campus: $2,647 (FSW Financial Aid).

Living Expenses

These are essentially “food and shelter” costs. Many college students live in a dorm and eat their meals on campus. Students who live off campus will have to pay for comparable things, like renting an apartment and buying their own groceries.  For the 2022-2023 School Year, room and board estimates at FSW are as follows for Full Time students: On Campus: $10,044 (2 semesters), At Home: $3,826 and Off Campus: $12,755 (FSW Financial Aid).

Personal Expenses

Regardless of where students live, they typically need money for things like laundry, cell phones, computers, and going out with friends. This expense can vary a lot depending on personal preferences. For instance, some students may prefer to make their own meals while others may prioritize eating out.  For the 2022-2023 School Year at FSW personal needs are estimated to cost $1,947 (FSW Financial Aid).

Opportunity Cost

Choosing to spend time and money going to college has an opportunity cost. If you are spending time and money on your education, you will not be spending that same time and money somewhere else. One example of this relationship is employment. Attending classes and doing homework may mean you can’t work at a job as much as you want to. It may also mean you will have less time to spend with friends and family. If you have a long commute to school, that commute may impact other aspects of your daily life.

FSW 2022-2023 Anticipated College Costs

FSW’s Financial Aid website provides the estimated totals for the anticipated costs of attendance, room and board, books and supplies, personal needs and transportation.  The website also provides information on the “Other institution-related fees” as well.  This information is vital because it gives students an itemized breakdown of where their tuition and fees dollars are going. Many students overlook these fees and do not realize the amenities that they provide.

Here are the estimated fees for the 2022-2023 School Year at FSW (all figures represent cost at a per credit hour rate):

In-State: Financial Aid Fee: $4.07, Student Activity Fee: $8.13, Capital Improvement Fee: $65.00, Technology Fee: $4.07 and Parking Fee: $2.00.

Out-of-State: Financial Aid Fee: $16.25, Student Activity Fee: $8.13, Capital Improvement Fee: $13.88, Technology Fee: $16.25 and Parking Fee: $2.00.

The following video will help you review the types of college expenses and examine particular costs that are common for both four-year and two-year institutions. Pay attention to the differences between public two-year, public four-year, private nonprofit four-year, and for-profit colleges of all levels.

You can view the transcript for “What is the Price of College?” here (opens in new window)

Financial Resources for College

Learning Outcomes

  • Examine sources of financial assistance and strategies for applying for financial aid

Paying for College

When it comes to covering all the costs of college, depending on how much money you’ve saved beforehand, you will probably want to investigate one or more of the following options:

  • Jobs: Full-time students may find part-time work on or off campus, while part-time students may work during the day and then take evening classes. Students can also talk to their guidance counselor and financial resource department about work-study opportunities, which allow students to receive money for completing work related to their studies
  • Free Application for Federal Student Aid (FAFSA): This free application, available here, requires students to answer questions regarding their background and personal finances in order to find out how much financial assistance they might qualify for. The financial assistance comes in the form of government loans, grants, work study, or scholarships. Financial aid will be discussed in greater detail later in this module. FSW’s FAFSA School Code is 001477.
  • Student loans: There are multiple loan types available at FSW. Students can apply for subsidized or unsubsidized loans through the government. Your college determines the amount of each type of loan offered to you. Subsidized loans allow you to defer payment until six months after your graduate, while unsubsidized loans still accrue interest while you’re in college. Students may also obtain private loans through their banks. However, these types of loans are typically subject to more interest. Check the U.S. Department of Education website for information on applying for different types of loans.
  • Grants and scholarships: Students can apply for grants and scholarships through their institutions, local businesses, or online organizations. Scholarships may be awarded on the basis of merit (grades, achievements, volunteer work, etc.), financial need (economic status), or some other set of criteria (achievements and ethnic background, for instance). Unlike loans, grants and scholarships don’t need to be paid back, with the exception of certain grants (i.e. Teach Grant- if certain criteria are not met). You can visit your financial aid office for listings of available grants and scholarships, or conduct independent research at sites like College Scholarships.

Types of Financial Aid: How to Pay for College

The true cost of college may be more than you expected, but you can make an effort to make the cost less than many might think. While the price tag for a school might say $40,000, the net cost of college may be significantly less. The net price for a college is the true cost a family will pay when grants, scholarships, and education tax benefits are factored in. The net cost for the average family at a public in-state school is only $3,980. And for a private school, free financial aid money reduces the cost to the average family from $32,410 per year to just $14,890.

If you haven’t visited your college’s financial aid office recently, it’s probably worth taking the time to talk with them. You must seek out opportunities, complete paperwork, and learn and meet criteria, but doing so can save you thousands of dollars.

Public and Private College Tuition and Fees
Type of College Average Published Yearly Tuition and Fees
Public Two-Year College (in-district students) $3,440
Public Four-Year College (in-state students) $9,410
Public Two-Year College (out-of-state students) $23,890
Private Four-Year College $32,410

Applying for Financial Aid, FAFSA, and Everything Else

The federal government offers a standard form called the Free Application for Federal Student Aid (FAFSA), which qualifies you for federal financial aid and also opens the door for nearly all other financial aid. Most grants and scholarships require you to fill out a FAFSA, and they base their decisions on the information in the application.

This free application asks students questions about their background, personal finances, and college, and provides information about what loans, work study, and other types of aid students might be eligible for. You may be unaware of factors that affect how much financial assistance you are eligible for, such as changes to your parents’ income or your job status, or having a sibling start college. These changing factors explain why it is important to fill out a new FAFSA application annually.

The FAFSA only requests financial aid for the specific year you file your application. You will need to file a FAFSA for each year you are in college. Since your financial needs will change over time, you may qualify for financial aid even if you did not qualify before.

You can apply for a FAFSA through your college’s financial aid office or at studentaid.gov if you don’t have access to a financial aid office. Once you file a FAFSA, any college can gain access to the information (with your approval), so you can shop around for financial aid offers from colleges.

Maintaining Financial Aid

To maintain your financial aid throughout your college, you need to make sure you meet the eligibility requirements for each year you are in school, not just the year of your initial application. The basic requirements include being a U.S. citizen or eligible non-citizen, having a valid Social Security number, and registering for selective service if required. Undocumented residents may receive financial aid as well and should check with their school’s financial aid office.

You also must make satisfactory academic progress, including meeting a minimum grade-point average, taking and completing a minimum number of classes, and making progress toward graduation or a certificate. Your school will have a policy for satisfactory academic progress, which you can get from the financial aid office.

What to Do with Extra Financial Aid Money

One expensive mistake that students make with financial aid money is spending the money on non-education expenses. Students often use financial aid, including student loans, to purchase clothing, take vacations, or dine out at restaurants. Nearly three percent spend student loan money on alcohol and drugs.[1] While using the money for non-education purposes seems like fun now, these non-education expenses are major contributors to student loan debt, which will make it harder for you to afford a home, take vacations, or save for your retirement after you graduate.

When you have extra student loan money, consider saving it for future education expenses. Just like you will need an emergency fund all your adult life, you will want an emergency fund for college when expensive books or travel abroad programs present unexpected costs. If you make it through your college years with extra money in your savings, you can use the money to help pay down debt.

Tips for Applying for Financial Aid

Applying for financial aid requires planning and organization. Below are steps you can take to increase your chances of getting help paying for college.

Make Sure Your FAFSA Information Is Accurate

Although it can be a chore to track down exact amounts (and it is so much easier to estimate things like your parents’ or your income), failure to provide accurate numbers can mean that you may not qualify for all the financial assistance you’re actually eligible for. Before you fill out the FAFSA form, be sure you have collected and have handy all the important information you’ll need. This includes your (and your parents’) tax forms, social security number, and income statements. The U.S. Department of Education’s Site for Federal Student Aid has more tips on how to effectively fill out your application.

Ask Your High School and College

If you’re still in high school or if you’ve recently graduated, ask your guidance counselor about grants and scholarships you could apply for. Your college will also be a good resource, since most institutions have their own scholarships and awards that are available to their students. FSW’s students can find scholarships available to our students through our Scholarship Homepage.

Ask Your Community

Check to see if your employer, place of worship, clubs, or volunteer organizations have any grant or scholarship opportunities. Although these sources may not offer as much as federal loans or college scholarships, they may help you cover the costs of books and/or supplies.

Check Due Dates

Whether you’re filling out the FAFSA or applying for scholarships, most organizations will have deadlines that you must meet—they are not flexible dates. These deadlines help ensure that if you are eligible, you will receive your financial assistance in time for the upcoming school year. If other people are helping you with your application—for example, teachers writing letters of recommendation for you—be sure to inform them of the deadlines and give them plenty of notice. The more time you give those helping you, the more time they’ll have to write good recommendations.

Write Strong Essays

Many scholarship applications will have an essay component. You can assume that the other students applying for a particular scholarship also meet the basic requirements (a certain GPA or above, certain demographic criteria, etc.), so often it isn’t enough to just have good grades or be eligible for a scholarship: the essay can be what really sets you apart. When you write application essays, make sure you take the time to write multiple drafts. You should also have family, friends, or teachers provide feedback as you go through revisions.

Grants and Scholarships

Learning Outcomes

  • Explore federal grants and scholarships as financial aid supports for college

Grants and Scholarships

Grants and scholarships are free money you can use to pay for college. Unlike loans, you never have to pay back a grant or a scholarship. All you have to do is go to school. And you don’t have to be a straight-A student to get grants and scholarships. There is so much free money, in fact, that billions of dollars go unclaimed every year.[2]

While some grants and scholarships are based on a student’s academic record, many are given to average students based on their major, ethnic background, gender, religion, or other factors. There are likely dozens or hundreds of scholarships and grants available to you personally if you look for them.

Federal Grants

Federal Pell Grants are awarded to students based on financial need, although there is no income or wealth limit on the grant program. The Pell Grant can give you more than $6,000 per year in free money toward tuition, fees, and living expenses.[3] If you qualify for a Pell Grant based on your financial need, you will automatically get the money.

Federal Supplemental Educational Opportunity Grants (FSEOGs) are additional free money available to students with financial need. Through the FSEOG program, you can receive up to an additional $4,000 in free money. These grants are distributed through your school’s financial aid department on a first-come, first-served basis, so pay close attention to deadlines.

Teacher Education Assistance for College and Higher Education (TEACH) Grants are designed to help students who plan to go into the teaching profession. You can receive up to $4,000 per year through the TEACH Grant. To be eligible for a TEACH Grant, you must take specific classes and majors and must hold a qualifying teaching job for at least four years after graduation. If you do not fulfill these obligations, your TEACH Grant will be converted to a loan, which you will have to pay back with both interest and back interest.

There are numerous other grants available through individual states, employers, colleges, and private organizations.

State Grants

Most states also have grant programs for their residents, often based on financial need. Eleven states have even implemented free college tuition programs for residents who plan to continue to live in the state. [4] Students in Florida can find a variety of grants and scholarships through the Florida Student Scholarships and Grant Programs website. Even some medical schools are beginning to be tuition-free. Check your school’s financial aid office and your state’s department of education for details.

College/University Grants and Scholarships

Most colleges and universities have their own scholarships and grants that are distributed through a wide variety of sources, including the school’s financial aid office, the school’s endowment fund, individual departments, and clubs on campus.

Private Organization Grants and Scholarships

A wide variety of grants and scholarships are awarded by foundations, civic groups, companies, religious groups, professional organizations, and charities. Most are small awards under $4,000, but multiple awards can add up to large amounts of money each year. Your financial aid office can help you find these opportunities.

Employer Grants and Scholarships

Many employers also offer free money to help employees go to school. A common work benefit is a tuition reimbursement program, where employers will pay students extra money to cover the cost of tuition once they’ve earned a passing grade in a college class. And some companies are going even further, offering to pay 100 percent of college costs for employees. Check to see whether your employer offers any kind of educational support.

Two nursing students practice taking someone's pulse on a medical dummy.
Employers in certain fields, such as healthcare, may offer their own grants and scholarships. (Credit: Ano Lobb / Flickr / Attribution 2.0 Generic (CC-BY 2.0))

Applying for Scholarships

Thinking about applying for scholarships can seem like an overwhelming prospect, and students have many excuses for not applying. There are so many scholarships available for college that knowing where to start is the first obstacle to the process. Remember, scholarships are a gift of money for college. A gift does not have to be paid back like a loan does.

Scholarships are offered to students who meet a specific requirement established by the sponsor, who may be an individual or an organization. Scholarships can be offered through local, state, or national sponsors. Each scholarship will have its own requirements based on the purpose of the scholarship. Scholarships are a good way to help pay for college without increasing student debt. Students may apply for multiple scholarships. Receiving a scholarship will affect the student’s overall financial aid award because all the student aid added together cannot be more than the cost of attending college. However, it is important to realize that scholarships are gifts and do not have to be repaid, so trying to include a scholarship in your overall financial aid package is a good idea.

Common Excuses for Not Applying for Scholarships

  • Scholarships are only for people with good grades or athletic skills.
  • There aren’t scholarships for someone like me.
  • You have to be a good essay writer to win a scholarship.
  • There is too much competition to even try.
  • Finding scholarships to apply for is hard and takes too much time.
  • Scholarship awards are for small amounts of money, so it’s not worth it.
  • Scholarships are only for high school graduates.
  • GED graduates can’t get scholarships.

Finding Scholarships for Free by Researching Online

Finding scholarships requires research and effort on the part of the student, but the effort can have a financially rewarding outcome. Searching for scholarships today is much easier than in the past. Students used to have to comb through books in counselors’ offices and photocopy applications to be put in the mail, snail mail!

The Internet has changed the search process. In today’s scholarship hunt, a student can use several websites to help find the treasure. Never pay for help to search for scholarships. Websites that charge fees to find scholarships may be scams. The Scholarship Fraud Prevention Act of 2000 was passed to help increase the penalties for people convicted of scholarship fraud. Before this act was passed, the Federal Trade Commission was limited to closing operations defrauding consumers. Now the government has the power to incarcerate or fine perpetrators of scholarship fraud.

Free help can be found through the college you have selected to attend as well as through several great websites. Check with student support services at your college to see what services are offered. Scholarship Junkies, UnigoFastweb, and Fin Aid are examples of online resources for finding scholarships to apply for. Unigo even has a section for scholarships that don’t require an essay.

You Can Write an Amazing Personal Statement!

Sometimes students worry that they don’t have a good answer to the questions posed by the scholarship application. Your answer doesn’t need to be a world-saving event. It needs to show your personality and qualities that will be worth investing in. Finding small stories to tell will make better statements when you only have limited characters to use.

The personal statements and essays in a scholarship application are the place a student can set themselves apart from the other applicants. However, sitting down and writing an inspiring essay in 1,000 characters or 150 words can seem like an impossible task.

One way to get started is to write something less structured. Try writing a random autobiography about yourself. This autobiography can be a fun way to start thinking about yourself and your experiences in order to find topics to use for personal statements and essays. It’s your story—you can’t get it wrong.

Mistakes to Avoid When Applying for Scholarships

Scholarship committees want to give their money away to deserving students. It’s your job to properly sell yourself so they know why you are the right choice. Build a profile that can’t be ignored, one that showcases your originality, your character and your drive to be successful. Avoid these common mistakes students make. Get your application done right!

  • Missing the deadline: Deadlines matter and once they pass, the opportunity for that scholarship has ended for that year. It is important to pay attention to the time zone the deadline occurs in. The scholarship website may be located in a different time zone than you are. If the deadline says 11:30 p.m. EST (Eastern Standard Time), that is 8:30 p.m. PST (Pacific Standard Time). If the scholarship says it’s due by March 15th, it means it. On March 16th, you will not be able to submit the application. These strict deadlines are a harsh reality for some students who put off working on their scholarship applications.
  • Filling out the application incorrectly: The directions on a scholarship application are not suggestions. They are the basic requirements that you need to fulfill in order to be considered for a scholarship. If you do something careless like emailing your application when you are supposed to mail it or not bothering to format your application correctly, you may not get the scholarship.
  • Submitting an incomplete application: Scholarship committees request specific information because they need it. If the scholarship committee does not receive all of that information from you, the scholarship committee will likely look at your application, see that it is incomplete, and move it to the disqualified pile. If your application is submitted online and the information is incomplete, the application will not make it past the computer screening.
  • Applying to scholarships you’re ineligible for: Read the requirements of the scholarship carefully. If there is a specific aspect of the scholarship that you do not meet, find a different scholarship to apply for.
  • Being unfamiliar with the sponsor of the scholarship: Use the Internet to find out as much as possible about the sponsor of the scholarship. If it is a company or organization, find out what their mission is and what they care about. If the sponsor is a person or in memory of a person, what was the person’s passion?
  • Failing to proofread your application: Always have someone proofread your application before you send it in. This proofing will help reduce any spelling or grammar errors or other mistakes that may be in your application before you send it. If you want to earn some money, you’ll want your application to be as polished as possible!
  • Not adhering to the word count limit: Word count is probably the most common scholarship essay mistake. If the application asks for a word range, hit the range. If it asks for a specific word count, hit the word count as closely as possible. This adherence shows you’re capable of paying attention and satisfying specific requirements.
  • Using an unprofessional email address: While a cute or risqué email address can seem clever among your group of friends, it can send the wrong message to a scholarship committee, or to the professors at your college. When applying for scholarships, avoid email addresses that use nicknames, profanity, that are offensive, or that have sexual connotations. Instead, create a professional email address to use for scholarship applications and professional correspondence. Keep it simple and straight forward by using variations of your first, middle, and last name.

Additional Federal Support

The federal government offers a handful of additional options for college students to find financial support.

Education Tax Credits

The IRS gives out free money to students and their parents through two tax credits, although you will have to choose between them. The American opportunity tax credit (AOTC) will refund up to $2,500 of qualifying education expenses per eligible student, while the lifetime learning credit (LLC) refunds up to $2,000 per year regardless of the number of qualifying students.

While the AOTC may be a better tax credit to choose for some, it can only be claimed for four years for each student, and it has other limitations. The LLC has fewer limitations, and there is no limit on the number of years you can claim it. Lifetime learners and nontraditional students may consider the LLC a better choice. Calculate the benefits for your situation.

The IRS warns taxpayers to be careful when claiming the credits. There are potential penalties for incorrectly claiming the credits, and you or your family should consult a tax professional or financial adviser when claiming these credits.

Federal Work-Study Program

The Federal Work-Study Program provides part-time jobs through colleges and universities to students who are enrolled in the school. The program offers students the opportunity to work in their field, for their school, or for a nonprofit or civic organization to help pay for the cost of college. If your school participates in the program, it will be offered through your school’s financial aid office.

Student Loans

Learning Outcomes

  • Explore factors in borrowing and repaying student loan debt

Federal Student Loans

Federal student loans are offered through the U.S. Department of Education and are designed to give easy and inexpensive access to loans for school. You don’t have to make payments on the loans while you are in school, and the interest on the loans is tax deductible for most people. Direct Loans, also called Federal Stafford Loans, have a competitive fixed interest rate and don’t require a credit check or cosigner.

Direct Subsidized Loans

Direct Subsidized Loans are federal student loans on which the government pays the interest while you are in school. Direct Subsidized Loans are made based on financial need as calculated from the information you provide in your application. Qualifying students can get up to $3,500 in subsidized loans in their first year, $4,500 in their second year, and $5,500 in later years of their college education.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are federal loans on which you are charged interest while you are in school. If you don’t make interest payments while in school, the interest will be added to the loan amount each year and will result in a larger student loan balance when you graduate. The amount you can borrow each year depends on numerous factors, with a maximum of $12,500 annually for undergraduates and $20,500 annually for professional or graduate students. There are also aggregate loan limits that put a maximum cap on the total amount you can borrow for student loans.

Direct PLUS Loans

Direct PLUS Loans are additional loans a parent, grandparent, or graduate student can take out to help pay for additional costs of college. PLUS loans require a credit check and have higher interest rates, but the interest is still tax deductible. The maximum PLUS loan you can receive is the remaining cost of attending the school.

Parents and other family members should be careful when taking out PLUS loans on behalf of a child. Whoever signs the loan is responsible for the loan forever, and the loan generally cannot be forgiven in bankruptcy. The government can also take Social Security benefits should the loan not be repaid.

Private Loans

Private loans are also available for students who need them from banks, credit unions, private investors, and even predatory lenders. But with all the other resources for paying for college, a private loan is generally unnecessary and unwise. Private loans will require a credit check and potentially a cosigner, they will likely have higher interest rates, and the interest is not tax deductible. As a general rule, you should be wary of private student loans or avoid them altogether.

Student Loans 101

Watch the video below to learn more about the different types of loans available to college students.

Using a Loan Calculator

Students need to remember that they are consumers when it comes to taking on loans for college. Not thinking about what the debt means after college only compounds the issues. It is important to think about how much you could afford to pay monthly on a student loan once you have completed college. It’s easy to do the math on loan costs. The Smart Student’s Guide to Financial Aid has a free loan calculator that will do the work for you. All you have to do is plug in the numbers. The loan calculator will also give you an estimate of what your annual salary will need to be to be able to repay the loan. Of course, the loan calculator will not know your other financial commitments, so be sure to look at the monthly payment and decide if you can afford that additional expense.

Repayment Strategies

Payments on student loans will begin shortly after you graduate. While many websites, financial gurus, and talking heads in the media will encourage you to pay off your student loans as quickly as possible, you should give careful consideration to your repayment options and how they may impact your financial plans. Quickly paying off your student loans or refinancing your student loans into a private loan may be the worst option available to you.

Payment Plans

The federal government has eight separate loan repayment programs, each with their own way of calculating the payment you owe. Five of the programs tie loan payments to your income, which can make it easier to afford your student loans when you are just starting off in your career. The programs are described briefly below, but you should seek the help of a licensed fiduciary financial adviser familiar with student loans when making decisions related to student loan payment plans.

The standard repayment plan, also called the graduated plan, sets a consistent monthly payment to pay off your loan within ten years (or up to thirty years for consolidated loans). You can also choose a graduated repayment plan, which will begin with lower payments and then increase the payment every two years. A third option is the extended repayment plan, which provides a fixed or graduated payment for up to twenty-five years. However, none of these programs are ideal for individuals planning to seek loan forgiveness options, which are discussed below.

Beyond the normal repayment options, the government offers five income-based repayment options: (1) the Pay As You Earn (PAYE) repayment plan, (2) the Revised Pay As You Earn (REPAYE) repayment plan, (3) the Income-Based Repayment (IBR) plan, (4) the Income-Contingent Repayment (ICR) plan, and (5) the Income-Sensitive Repayment (ISR) plan. Each program has its own method of calculating payments, along with specific requirements for eligibility and rules for staying eligible in the program. Many income-based repayment plans are also eligible for loan forgiveness after a set period of time, assuming you follow all the rules and remain eligible.

Federal Student Aid Loan Simulator

You can try out the Federal Student Aid Loan Simulator to see how you can lower your payment, pay off your loans faster, decide whether to consolidate your debt, and explore options for if you’re struggling with your payments or considering borrowing more in student loans.

Loan Forgiveness Programs

Many income-based repayment options also have a loan forgiveness feature built into the repayment plan. If you make 100 percent of your payments on time and follow all the other plan rules, any remaining loan balance at the end of the plan repayment term (typically twenty to thirty years) will be forgiven. This means you will not have to pay the remainder on your student loans.

This loan forgiveness, however, comes with a catch: taxes. Any forgiven balance will be counted and taxed as income during that year. So if you have a $100,000 loan forgiven, you could be looking at an additional $20,000 tax bill that year (assuming you were in the twenty percent marginal tax rate).

Another option is the Public Service Loan Forgiveness (PSLF) program for students who go on to work for a nonprofit or government organization. If eligible, you can have your loans forgiven after working for ten years in a qualifying public service job and making 120 on-time payments on your loans. A major advantage of PSLF is that the loan forgiveness may not be taxed as income in the year the loan is forgiven.

Consider Professional Advice

The complexity of the payment and forgiveness programs makes it difficult for non-experts to choose the best strategy to minimize costs. Additionally, the strict rules and potential tax implications create a minefield of potential financial problems. In 2017, the first year graduates were eligible for the PSLF program, ninety-nine percent of applicants were denied due to misunderstanding the programs or having broken one of the many requirements for eligibility.[5]

How U.S. Student Loans Became a $1.6 Crisis

Watch this video to learn more about the student loan crisis.

Your Rights as a Loan Recipient

As a recipient of a federal student loan, you have the same rights and protections as you would for any other loan, including the right to know the terms and conditions for any loan before signing the paperwork. You also have the right to know information on your credit report and to dispute any loan or information on your credit file.

If you end up in collections, you also have several rights, even though you have missed loan payments. Debt collectors can only call you between 8:00 a.m. and 9:00 p.m. They also cannot harass you, threaten you, or call you at work once you’ve told them to stop. The United States doesn’t have debtors’ prisons, so anyone threatening you with arrest or jail time is automatically breaking the law.

Federal student loans also come with many other rights, including the right to put your loan in deferment or forbearance (pushing pause on making payments) under qualifying circumstances. Deferment or forbearance can be granted if you lose your job, go back to school, or have an economic hardship. If you have a life event that makes it difficult to make your payments, immediately contact the student loan servicing company on your loan statements to see if you can pause your student loan payments.

The Consumer Financial Protection Bureau (CFPB) has created a series of sample letters you can use to respond to a debt collector. You can also file a complaint with the CFPB if you believe your rights have been violated.

Student Story: What I Wish I’d Known about Student Loans

This student story was written as part of Lumen’s College Success Student Contributors project. The story student stories are written in collaboration with real college students and college graduates to reflect real student experiences.

I went to three colleges and at no point did anybody say to me, “Hey, this is how you fill out a FAFSA.”

Even though I came from a family of educators, my family was doubtful I would make it to go to college because I didn’t take high school seriously. I had no concept of what it was going to cost to go to school, and my family couldn’t pay for both me and my sister, who were two years apart, to go to school. My parents submitted a FAFSA for me when I applied to school, and through a combination of loans and grants, and some help from other family members, I was able to start working on my degree in creative writing.

I became friends with the financial aid officer at my school and she would talk with me whenever I had any issues or questions about my aid. Then my parents got divorced when I was in school. She told me “Your parents submitted their divorce papers, I need to know who your custodial parent is because that will determine your financial aid.” At first I chose my father and step-mother because I was closer with them, but the aid officer told me that they made too much money for me to receive my aid package, so I decided to go with my mother instead.

I dropped out of school. I went back for a time, and then I dropped out again. Then, about two months after my ex-girlfriend and I broke up, I received an acceptance letter and financial aid letter in the mail for a school that told me they would take all my previous credits, and get me graduated in a year. My ex-girlfriend had submitted my application and FAFSA on my behalf.

I had already taken out $6,000 in loans and I was going to have to take out $14,000 more to graduate. That year, my bank told me that they wanted to consolidate everything for me. They were going to house my student loans, have me move my checking account over to them, and they gave me $5,000 in credit to use. At the beginning of the semester, money would appear in my account, and I would use it to cover pretty much any of my expenses, groceries, meals out, anything I wanted; I spent it. I ended up graduating with $21,000 in student loans and had amassed a large amount of credit card debt.

I work in the financial sector now and I now know things about debt I wish I would have known as a student. Six months after I graduated college, my student loans became due. While I had a job that could handle payments, I wasn’t aware of what was coming. I was gainfully employed for three years before the financial crisis of 2008. Suddenly I couldn’t pay, and my debt just kept growing and growing.

At the time, a lot of people were being told that forbearance was the best option for when you couldn’t pay. But what they didn’t tell you was that when you choose forbearance, it rolls over the debts of those missed payments towards the balance. For example, if you have three months where you were supposed to pay $150 a month, and you put your loan into forbearance, that $450 gets rolled into the total due. I was told that forbearance was my best option, and because of that my debt grew from 21k to 26k during that time.

What I wish people knew about student loans is that they are unlike other debt. They are unsecured lines of credit, which means that if you can’t pay it back, there’s nothing for an institution to take back, so there can be very serious consequences for the forbearance. With a term loan like a loan for a car, you might take out $15,000 and pay six-and-a-half percent interest and you know you’ll be paying it back over five years or so. You get a schedule for a period of time and that’s the term loan. But student loans are different. Do your research and if you can’t make your student loan payment, ask your lender about suspension, not forbearance.

Making Financial Decisions

Learning Outcomes

  • Analyze strategies for financial decision-making and goal setting for your college education

“An investment in knowledge always pays the best interest.”

—Benjamin Franklin, The Way to Wealth: Ben Franklin on Money and Success

Financial Decision Making for College

As you progress through your college experience, the cost of college can add up rapidly. Worse, your anxiety about the cost of college may rise faster as you hear about the rising costs of college and horror stories regarding the student loan crisis. It is important to take control of your financial choices and the cost of your college experience. There is no one size fits all approach to making financial decisions in college, but keeping the following information in mind may help you make smart financial decisions for yourself as you work towards earning your degree.

Reflection Questions for Evaluating the Cost of School

Today’s colleges are in a competitive market for students. Thinking about the services you as a student need or want from a college environment can help define what is personally important and what you are willing to pay for. You may want to ask yourself the following questions to understand the expenses you may encounter in school.

  • How much is the degree or certificate you want to earn going to cost?
  • What factors go into the cost of the college?
  • What costs are included in tuition?
  • What costs are not included in tuition?
  • What is college worth to you?
  • How much money can you afford to spend on college?
  • Where can you get financing for college if you need help paying for it?
  • How much money do you think you could afford on a monthly basis to pay back a loan related to financing college?
  • What is the current interest rate on student loans?
  • Are interest rates all the same?
  • What do you think your life will be like after college?

Setting Financial Goals

Setting financial goals for yourself is one of the best ways to track and manage your expenses both while attending school and afterward. The following strategies can help:

  • decorative imageCreate SMART goals: SMART stands for specific, measurable, attainable, realistic, and timely. These kinds of goals are more manageable and can help you reach your final target more easily. For example, instead of setting a broad, vague goal of “paying for college,” you might set a goal of paying off your two college loans five years after you graduate. This more specific, measurable goal can help you keep track of your progress and whether you need to make changes to reach it.
  • Monitor your spending: Try keeping track of what you spend money on during a one-month period. This can help you see where your money goes and where you may be able to save. Some even suggest tracking your spending on a weekly basis as well. Using apps such as online banking, mint, and many more serve as a bank register where you can log every transaction.
  • Create a budget: Based on what you discovered after monitoring your spending, create a monthly budget you can stick to. While some expenses, such as food and transportation, are necessary, you may find that you can save money on both by riding a bike (instead of driving) to school and eating out less. When creating a budget it is key to deduct your fixed expenses and then calculate your discretionary income afterwards.
  • Consider working: Some students have full-time jobs while attending college, whereas others may not have a lot of time to work if they’re taking a full academic load. Depending on your circumstances, it’s worth looking into employment opportunities both on and off campus. Even if you feel like only a couple hours of work per week are possible, part-time work could help you pay for something like books so you have one less thing to worry about when you graduate.
  • Choose loans wisely: Many college students need some sort of financial support through loans. While loans are a good way to pay for tuition up front if you don’t have the money, remember that they accrue interest until you pay them off. That means that you will end up paying back more—in some cases, thousands of dollars more—than you initially borrowed. Make sure you investigate and apply for as many scholarships and grants as you can (since they won’t need to be repaid), and shop around for loans with the lowest interest rates and best repayment plans. Check with the financial aid office on your college campus—they can provide additional help.

These are only some steps you can take for creating college financial goals, but it’s important to find the right ones for you.

Matching Student Debt to Post-Graduation Income

Students and parents often ask, “How much debt should I have?” The problem is that the correct answer depends on your personal situation. A big-firm attorney in a major city might make $120,000 in their first year as a lawyer. Having $100,00 or even $200,000 in student debt in this situation may be reasonable. But a high school teacher making $40,000 in their first year would never be able to pay off the debt.

The amount of debt you take on should be tied to the income you expect.

Three occupations and three loan payments are compared. An attorney is projected to make $6,000 monthly after taking out $100,000 in student loans with a student loan payment of $1,110 a month over a 10 year period or $644 a month over a 25 year period. A teacher is projected to make $2,800 monthly after taking out $100,000 in student loans with a student loan payment of $1,100 per month over a ten year period or $644 a month over a 25 year period. In the third scenario, the teach who is still making $2,800 a month took out $30,000 in debt rather than $100,000 in debt and is making a $333 student loan payment monthly over a ten year period or $193 monthly payment over a 25 year period.
Each field of employment brings with it an average income and assumed debt. This graph shows the impact of an attorney’s income versus debt, and then compares a teacher who took a $100,000 loan with one who took a $30,000 loan. Note the teacher’s income is the same in both cases. (Credit: Based on information from National Association of Colleges and Employers and US Bureau of Labor Statistics.)

Research Your Starting Salary

Begin by researching your expected starting salary when you graduate. Most students expect to make significantly more than they will actually make.[6] As a result, your salary expectations are likely much higher than reality. Ask professors at your college what is typical for a recent graduate in your field, or do informational interviews with human resource managers at local companies. Explore the U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook. PayScale also has a handy tool for getting general information based on your personal experience and location. Search websites and talk to employees of companies that interest you for future employment to identify real starting salaries.

Undergraduate Degree: 1 x Annual Salary

For students working toward a bachelor’s or associate degree, both forms of undergraduate degrees, you should try to keep your student loans equal to or less than your expected first year’s salary. So if, based on research, you expect to make $40,000 in your first year out of college, then $33,000 in student loans would be a reasonable amount for you to pay out of a monthly budget with some sacrifice.

You may need to adjust your college plan as circumstances change for you and in the job market. You can modify plans based on funding opportunities available to you and your location. You may prefer a community-college-only education, or you may complete two years at a community college and then transfer to a university to complete a bachelor’s degree. Living at home for the first two years or for all of your college education will save a lot of money if your circumstances allow.

Advanced Degrees: 1–2 x Annual Salary

Once you’ve graduated with your bachelor’s degree, you may want to get an advanced degree such as a master’s degree, a law degree, a medical degree, or a doctorate. While these degrees can greatly increase your income, you still need to match your student debt to your expected income. Advanced degrees can often double your expected annual salary, meaning your total debt for all your degrees should be equal to or less than twice your expected first job income. A lower number for the debt portion of your education would be more manageable.

Your goal should be to pay for college using multiple methods so your student loan debt can be as small as possible, rather than just making low monthly payments on a large loan that will lead to a higher overall cost.

Student Story: Making Money Choices for School

This student story was written as part of Lumen’s College Success Student Contributors project. The story student stories are written in collaboration with real college students and college graduates to reflect real student experiences.

My parents really drilled it into me that if I had to take out loans that I should keep it under $10,000. I qualified for a scholarship at the local university, and my parents encouraged me to go there, but I really wanted to go out of state.

I didn’t know what I wanted to major in, or where I wanted to go to school, but I knew that I had to make a plan to pay for my education. I had no idea what I was going to do to earn money after college, and I didn’t want to feel like I was starting out behind financially in life. I didn’t understand the loan process and I didn’t want to make a mistake, or end up taking out more than I would reasonably be able to pay back.

After some research, I ended up applying for the Western Undergraduate Exchange scholarship, available to students in the Western region of the United States, including Alaska, Hawaii, Washington, Oregon, California, Idaho, Nevada, Montana, Wyoming, Utah, Arizona, Colorado, New Mexico, the Dakotas, the Northern Mariana Islands (CNMI), and Guam, who meet a minimum GPA requirement. If you qualify, you only have to pay in-state-and-a-half tuition for an out-of-state college on the West Coast, but there are sometimes restrictions on what you can major in.

I only looked at schools that were covered in the WUE scholarship program. In addition to applying for this scholarship, I made an excel sheet of the resident advisor opportunities at the schools I was interested in, whether or not undergrads could be teachers assistants, and the tuition and housing reduction costs I could be eligible for with those work opportunities.

I went into college with a four-year plan on how to pay for it. The first year I saved up and paid for the first year out of my own pocket. Then I became a peer mentor, and helped facilitate first-year breakout sessions for first-year core classes, which reduced my tuition and room and board costs. Taking on-campus jobs that didn’t pay a wage but reduced housing and meals costs was a strategy that ended up working for me. Senior year cost $3,000 to $4,000 a term, which added up to about $12,000 to $16,000.

Financing school myself was really stressful and in some ways I feel like it might have been easier to take out some loans to pay back later. However, looking back, I realize that taking these on-campus jobs also helped me feel more connected to the community at my school and the school itself, which kept me motivated to finish my degree.

I remember one day in school, when I was working as a peer mentor, the freshmen I was working with were all talking about how scared they were about paying for college and taking out more loans. I told them that everyone has their own loan and debt threshold, and to not let somebody else tell you what that is for you. Figure out what you’re comfortable with and stick with it. A lot of those students ended up going back to their home states to get in-state tuition; it was just more affordable for them. A lot of them had never heard that they could make these decisions on their own, so I told them to take out whatever was comfortable for them. I said to them, you’ll be paying these back for many years, so take some time to think about it.


college costs: in an obvious sense, tuition and room and board, but also fees, books and supplies (including technology), transportation, and other personal expenses

Free Application for Federal Student Aid (FAFSA): the standard, annual form that students fill out to determine their eligibility for most forms of financial aid

grants and scholarships: forms of free student aid that do not have to be paid back, and that may come from a variety of federal, state, local, and private sources

private loans: distinct from federal loans, these are offered by private lending institutions and are best avoided, as they typically have higher interest rates and few of the protections and repayment options available to federal loan borrowers

subsidized loans: student loans that do not accrue interest during the student’s enrollment

unsubsidized loans: student loans that accrue interest during a student’s enrollment, an arrangement that can add significantly to the overall debt

starting salary: the amount of money you can expect to make after graduation at the start of your career; this number should help you decide on a realistic debt load



  1. Kirkham, Elyssa. "Smart (and Dumb) Money Moves Students Are Making This Year According to Our Survey." Student Loan Hero, 15 March 2018, www.studentloanhero.com/featured/smart-dumb-money-moves-students/.
  2. Imam, Medha. "$2.9 Billion Unused Federal Grant Awards in Last Academic Year." USA Today, 2015,  www.usatoday.com/story/college/2015/01/20/29-billion-unused-federal-grant-awards-in-last-academic-year/37399897.
  3. "Federal Pell Grants Are Usually Awarded Only to Undergraduate Students." Federal Student AId, www.studentaid.ed.gov/sa/types/grants-scholarships/pell.
  4. Hopkins, Katy, Farran Powell, Emma Kerr, and Sarah Wood. "17 Tuition-Free Colleges." U.S. News, 13 Sept. 2021, www.usnews.com/education/best-colleges/paying-for-college/slideshows/tuition-free-colleges.
  5. Friedman, Zack. "99% Of Borrowers Rejected Again for Student Loan Forgiveness." Forbes, 1 May 2019, www.forbes.com/sites/zackfriedman/2019/05/01/99-of-borrowers-rejected-again-for-student-loan-forgiveness/.
  6. Hess, Abigail. “College Grads Expect to Earn $60,000 in Their First Job—Here’s How Much They Actually Make.” CNBC2019, www.cnbc.com/2019/02/15/college-grads-expect-to-earn-60000-in-their-first-job----few-do.html


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Finances in College Copyright © 2023 by David Evans is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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