How to Be Financially Secure as a College Student
- Students across the country are feeling the effects of COVID-19 on their finances.
- Sticking to a budget and opening a savings account can help you stay financially secure.
- Be sure to consider factors like if you have student loans and if you have a job.
- On-campus and government resources can help students get back on their feet.
As the economic downswing continues and unemployment rates soar, it's easy to feel insecure and financially vulnerable. No one wants to be a broke college student, but many hardworking young adults might find themselves in this exact situation.
Whether you are still being supported by your parents or are an adult learner with a family to take care of, chances are the repercussions of the coronavirus pandemic will have some effect on your finances.
If you learn to manage even small amounts of cash as a student, you’ll be better prepared to juggle your larger income and expenses once you graduate and enter the workforce.
These are challenging times, and — like the millions of Americans living paycheck to paycheck — you might not have a big cash cushion available to help out in an emergency.
The good news is that many resources are available to help individuals struggling financially. In this article, we go over in detail what you can do to stay financially secure as a college student during the COVID-19 pandemic.
Personal Finance Tips for College Students
Taking control of your finances is a good idea at any time, but now it's essential. Analyzing your spending habits can help you figure out what expenses you need to pay so that you can find ways to stay afloat.
Learning financial skills will help you immensely now and later in life. If you learn to manage even small amounts of cash as a student, you'll be better prepared to juggle your larger income and expenses once you graduate and enter the workforce.
Emergencies like COVID-19 also underscore the importance of being prepared. This probably won't be the last financial challenge you face in your lifetime, so learning how to get ready now — and how to deal with new financial challenges as they come up — can help you stay financially secure for the rest of your life.
Create a Budget
Budgeting is a bit of a two-step process. First, you need to create your budget. This is simply a list of all your expenses and income.
"The first step is to cut unnecessary variable expenses (gym, subscriptions, etc)," says Taylor Venanzi, a certified financial planner and owner of Activate Wealth LLC. "Naturally, other types of variable expenses will come down, too. For example, you can't spend money on dining out."
Second, you'll need to find a way to track your budget from month to month as you spend and earn money. There are many free apps that can help you do this, such as Mint and YNAB (You Need A Budget), which offers a free 34-day trial.
Budgeting may be the most underrated yet important part of managing your finances. It's your roadmap for making sure you don't go into debt and can afford the things you want and need. Daily spending decisions add up over time, and small splurges can translate into many lost opportunity costs if you're not careful and don't follow a budget.
Open a Savings Account
It's never too late to start saving. When you draft up your budget, you should include a line item for savings. You can save for specific things, like a vacation or a new car, but you should also make sure you're contributing savings to an emergency fund. "The general rule of thumb is [to save] 3-6 months of fixed expenses/necessities," says Venanzi.
That sounds like a lot, but anything you can save today — even if it's just $5 — can help down the line. Setting aside small amounts helps you develop the habit of saving money. Plus, with the pandemic causing so many businesses to close and events to be canceled, now's a great time to start saving some of your discretionary income, if you're able.
Tips for Savings Accounts and Deposits
- Find a bank or credit union that offers a high interest rate and zero fees.
- Credit unions are good options for students and tend to offer more generous terms and interest rates.
- If you don't need money in the short term, you can open a certificate of deposit (CD) that locks in a particular interest rate.
- Unless it's a no-penalty CD, you should not withdraw money early.
- Ensure the financial institution is FDIC-insured, and read the fine print before opening a new account.
When looking at savings account options, choose a bank or credit union that offers a high interest rate and low (or zero) fees as a safe place to store your money. That way, your money will be working for you and gaining interest instead of just sitting around. Also, having money stored in a separate place can help reduce the temptation to spend it outside of a true emergency.
Certificates of deposit (CDs, or "share certificates" as they're known at some credit unions) are another way to save and earn a higher-than-normal interest rate in exchange for keeping your money locked away for several months or years. Be careful with these, however, because you'll typically need to pay a high penalty fee if you withdraw your money early.
If you know for certain that you won't need to access your money for a certain period of time, CDs can be good options.
Factors to Consider If You Have Student Loans
The CARES Act, which was signed into law in response to COVID-19 last spring, made sweeping, albeit temporary, changes to federal student loans. Through September 30, all federal direct student loans now have a 0% interest rate, and you won't be required to make any payments on them.
- If You're In College
If you're currently in college, you can opt in to forbearance on your federal student loans. To do this, contact your loan service provider or call 1-800-4-FED-AID.
Regardless of whether you opt in to forbearance, interest won't accrue on your unsubsidized loans until at least October. It'll be as if all of your federal direct loans were subsidized during this period of time, and the balance won't grow for most of this year.
- If You're Paying Back Your Student Loans
If you're paying back any of your federal direct loans, this means you can take a penalty-free pause on making payments. In fact, if you're signed up for autopay, these payments should have already automatically stopped. You can still make your payments (or even extra payments) if you wish, but this isn't required.
It's important to note that the CARES Act doesn't apply to all loans. Private student loans, FFEL loans, and Perkins loans that are held by banks and private lenders, rather than the government, are ineligible for these benefits.
Unfortunately, this means that a lot of loan-holders won't receive this benefit. In 2015-16, for example, a whopping 1.1 million students took out private loans. If you have any of these loans, your only recourse is to ask your lender for financial assistance. Thankfully, many lenders are offering help — but they're not required to do so.
If you're not sure what types of loans you have, you can check the status of your federal student loans using the National Students Loan Data System. You can also contact your loan servicer directly.
- If You're Worried About Pell Grant and Student Loan Limits
Typically, the amount of money you can borrow through federal student loans or receive in the form of Pell Grants is limited; however, the CARES Act mandates that any funds taken out at this time won't count toward your lifetime limits, meaning this crisis won't have any effect on your ability to borrow money for future schooling.
In addition, you may also be able to file for more federal financial assistance if you and/or your family have lost income as a result of the COVID-19 pandemic. To do this, you'll need to file an amended FAFSA.
Factors to Consider If You Lost Your Job
Campus closures and stay-at-home orders have resulted in many individuals losing their jobs. Unemployment can be especially stressful if you're working your way through college.
Fortunately, there are resources that can help stabilize your income right now. In addition, the Office of Postsecondary Education released some rules for colleges that have been forced to close campuses as a result of the pandemic.
If you were on a federal work-study program, you may be able to work remotely. If that's not possible and your term already started by the time your campus closed down, you may still be eligible to receive that money, according to the Department of Education. To determine the status of your work-study program, check with your school.
If you weren't on a federal work-study program and lost your job, you can apply for unemployment benefits through your state. Workers making money through a side gig or as an independent contractor typically aren't eligible for these benefits. However, with recent federal changes, now they can be.
Find a Side Hustle or Temporary Job
If you were working on campus but lost your position due to a campus closure, you can seek out a temporary part-time job elsewhere while you continue your studies. Many grocery stores and delivery services are hiring right now.
Factors to Consider If You Have a Retirement or Investment Account
Now's the time to check for any hidden or forgotten accounts you have available to you, such as a taxable brokerage account, a college 529 plan, or a Roth IRA that you or a parent might have started for you.
Roth IRAs in particular are great places for college students to save. That's because you can keep the money in this account to save for retirement, but if you ever need the money (such as during a financial emergency caused by a pandemic), you can withdraw the contributions (i.e., deposits) without paying taxes and fees.
Retirement and investment accounts can be a little complicated to understand. If you need help, you or your parents can call your investment company and/or an accountant to sort out how much you can safely withdraw and how much you should leave in your accounts.
Other Sources of Financial Help for College Students
Even if you haven't lost a job or source of income as a result of the COVID-19 pandemic, you can still access many resources to help you through this trying time.
If you need help finding a place to live while your campus is closed down, affording food, finding transportation, or managing other expenses, it's a good idea to check with your college or university, which should have assistance programs targeted toward students like you. Contact your college's financial aid office or student affairs office to see what help is available.
Not every student can just pack up and go home — this would leave some students homeless. And even if a student does have a welcoming home, they might not be able to afford to get back. This is why many colleges are letting students stay in their dorms and offering grants and other forms of financial assistance to students.
There are many resources out there at the local and state levels for all citizens, including you. These may be broader and targeted more to the general public, but it's still worthwhile seeking this type of assistance if you need it. Note that it may take some time to track down the financial resources that are relevant for you.
Below are some places to start your search:
So far the federal government has paid out two stimulus checks to most Americans (the first worth $1,200 and the second worth $600). If, however, your parents claimed you as a dependent on their tax return, you likely didn't qualify for either check. Fortunately, the Biden administration intends to issue at least one more stimulus check in coming months, with the goal of making adult dependents, including most college students, eligible to receive it.
You can contact any company or person you owe a bill to, such as your landlord (if you live off campus) or your bank. Many companies are waiving payments and fees or working with individuals to set up payment plans.
Stay Connected With Your School
You might be wondering what'll happen to all the money you already paid out for tuition and room and board at your school. That's a valid concern, and the answer to this question depends on your school.
Most colleges are offering refunds for these expenses, but some aren't. That's why it's important to stay in touch with your school. Make sure you're signed up for email alerts and that you follow your institution's official social media accounts for the most accurate and up-to-date information.
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