“Spend less than you earn” is a golden rule in personal finance. If you can follow that rule, you’ll avoid debt and build savings. But college students have a remarkably tough time following this rule, primarily because college tuition costs so much relative to the typical student’s income.
Since college student’s expenses are almost always higher than their income, budgeting may seem like a silly exercise. After all, you’ll take on some debt no matter what. The difference may seem insignificant when you’re taking out student loans. But when it comes to repayment, the difference is massive. You don’t want to be 44 years old and still paying for a Calculus 101 textbook and crappy beer.
Budgeting may not prevent all student debt. But it can help college students understand how income and expenses work together, so they can minimize their overall debt load. This college budget guide gives tips to get you started and provides sample budgets for different scenarios.
Budgeting As A College Student
Since the typical “spend less than you earn” mantra doesn’t always work for college students who have to cover large tuition bills, it can be tempting to ditch budgeting altogether.
However, that mindset can lead you to take on excess student debt, or even fall into credit card debt. This type of debt can hamper you as you begin your post-collegiate journey.
To avoid the mindset trap, I advise college students to break their expenses into two categories:
2. Living expenses and fun money
Tuition isn’t something that needs to be covered by current income. You can use savings (yours or your parents), scholarships, or student loans to cover this expense. That’s not to say tuition costs don’t matter. They do. You don’t want to buy a $160,000 education when you can get the same value for $26,000. But the income source won’t be your part-time paycheck.
Living expenses should typically be covered by your income including savings from summer jobs and internships. As a college student, you likely have a lot of flexibility to keep most of your living expenses low. Doing so means you’ll have some room in your budget for fun.
Related: Best Budgeting Apps For Your Style
Managing Lumpy Income And Expenses
Many college students earn “lumpy” income. They may only earn a few hundred dollars per month during the school year. But then they may earn several thousand dollars when working full-time over summer break.
Managing this “feast or famine” style of income is difficult even for experienced money managers. To better manage this type of income, it’s useful to look at your income over the year and plan your budget that way.
If it looks like you don’t have enough savings to pay your living expenses for the full year, you may need to add a little bit of extra to your borrowing. Ideally, you'll be able to offset any extra debt by taking out less the next year.
Budget Categories For Traditional College Students
At a high level, I advise that college students should break costs into Tuition and Fees and everything else. However, the categories below can provide some useful parameters for thinking about spending.
Since this is a breakout for traditional college students, you won’t see categories like taxes or child care in this breakout. Of course, if you have a child, or you're self-employed, you’ll need to add those costs in as well.
Tuition And Fees
Tuition and fees are typically the number one line item for students. The high costs aren’t a problem if you have scholarships to cover the cost. However, students who struggle to find scholarships will want to consider lower-cost college options like attending a community college or choosing in-state schools.
Health And Medical
Many traditional college students will qualify for their parent's health insurance plan. But if your parent’s insurance doesn’t cover you, you’ll need to budget for a low-cost plan.
Most of the time, a school will offer a low- or no-cost health plan for students. Just keep in mind that even with health insurance, you may need to pay copays for prescription drugs, visits to the doctor, or therapy sessions.
Rent And Utilities
Rent and utilities can eat up a large portion of the college student’s budget. Splitting an apartment (including sharing a bedroom) is a classic way for college students to keep costs low. But that isn’t the only option.
Students may live with family, take work as a live-in caregiver, house-sit, or find ways to house hack. All of those options can yield a super low-cost living situation.
You need a cell phone and WiFi to attend school and stay connected. But cell phone and internet bills can be astronomical. But paying too much for your cell phone plan isn’t a status symbol. Use one of these plans to keep your cell phone bill in check.
As a student, you need to get from place to place. And that costs some money. Many college students combine bicycles, public transit, and the occasional Uber ride to meet their transit needs. Car ownership is a more expensive way to cover transit, but it can be a necessary cost.
Unfortunately, owning a car will typically eat up a big portion of a college student's budget, even if the student drives a paid-off car. When you combine car repairs, insurance, and fuel, even inexpensive, paid-off cars can cost hundreds each month to drive.
College food costs can be all over the board. Some students eat out all the time. Others take advantage of meal plans. Still others subsist on oatmeal and peanut butter. This is one area where you can probably be flexible with your spending.
During college, you may not have much money. But you'll typically have a lot of time. So take advantage of opportunities to have some fun.
Take road trips, hike, study abroad, dance, listen to live music, goof off with your friends. Whatever you like to do, set aside some money in the budget for making it happen.
Textbooks And Other School Equipment
You may need to buy several textbooks or software programs to complete your coursework. Always look for low-cost ways to rent or buy the text, but make sure you have what you need.
Sample College Budgets
The college budgets below are “sample” budgets for students living in a variety of situations. Some need cars. One needs to pay for her health insurance. All have different priorities and college situations.
Despite the variety of budgets, each student covers their living expenses and fun money during the year. They limit their debt to tuition costs alone.
For the most part, these students cover their living costs by finding higher-paying gig work during the school year. All four also work full-time (or even more than full-time) during the summer.
Community College Student Living at Home
Community College Callen is working to earn his associate’s degree from a local community college before transferring to the flagship state university to complete his degree. He drives a used pickup to school and work, but he still owes money on the vehicle.
During the school year, he works 15 hours per week as a lifeguard, earning $16 per hour. And during the summer, he manages a landscaping crew and earns $22 per hour for the full-time job.
Here's a sample college budget for Callen:
Savings Or Debt
Scholarship Student Living On Campus At Private Liberal Arts School
Scholarship Sally has a scholarship that covers 100% of the tuition at her pricey liberal arts school. Since the school is in a small town, Sally works on campus at the library. She only earns $12 per hour at this job and works 8 hours per week.
She also does some online ACT prep classes and earns $40 per hour at this job working 4 hours per week on average. During the summer, she earns $15 per hour as an intern at a consulting firm on top of her tutoring. She doesn’t own a car and she lives with relatives during her internship.
Here's a sample college budget for Sally:
Savings Or Debt
Public University Student Splitting Apartment With Friends
Public University Patricia attends the flagship university in her state. She has a few small scholarships and her parents are chipping in what they can to help her avoid overwhelming debt. She lives in an off-campus apartment that she splits with 3 other people.
Since she lives in the city, she doesn’t need a car. During the school year, Patricia earns around $300 per week working side gigs. She charges scooters, works with a catering company and flips thrift finds on eBay. During the summer, she continues most of her side gigs and she works 35 hours per week as a Nanny earning $18 per hour.
Here's a sample college budget for Patricia:
Savings Or Debt
Public University Student Studying Abroad In Spain
Study Abroad Steve is living in a fictional world where COVID-19 doesn't exist and is studying abroad in Spain. During his five-month stay in Spain, he won’t work. However, for the rest of the school year, he will referee an average of 10 soccer games per week, earning $400 per week.
During the summer, Steve earns $16 per hour working full-time as a janitor at a gym. He also continues to referee soccer games on the weekends. Steve owns a car in the United States.
Here's a sample college budget for Steve:
Savings Or Debt
Living like a college student doesn’t have to mean eating Ramen and studying in the library all the time. You can enjoy fun experiences, good food, friendships, travel (assuming it is safe), and necessities without taking on excessive debt.
One of the keys to having this fun without taking on accompanying debt is to find higher earning opportunities that will provide income to cover your lifestyle expenses. And the other key to this is to put pen to paper to figure out a reasonable budget.
Once you have the first draft of your college budget in place, it will be much easier to find the "pain points" where you may need to cut back. Be sure to check out our guide to saving money in college for more tips on how to cut costs while you're enrolled in school.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.