College Money

Lessons

1. Lesson 1: FAFSA and financial aid, every single year

   The FAFSA is the free federal form that unlocks federal grants, work-study and federal student loans. Many states and colleges use it for their own aid too. It is filed again for every school year you want aid.

   • It opens each fall for the following school year. File early: some state and school aid runs out, and deadlines are set by the state and the college, not only the federal government.
   • Most students under 24 are treated as dependents, so a parent is usually a contributor who needs their own StudentAid.gov account and has to give consent on the form. Start that early — it is the most common delay.
   • Your aid offer lists grants and scholarships (no repayment), work-study (earned) and loans (repaid with interest). Accept the free money first and borrow only what is left.

   Simple example

   Two classmates with similar families: one files in October and receives a state grant; the other files in March after the state's money has run out.

   Mistake to avoid

   Paying a website to file. The FAFSA is free at StudentAid.gov — and never share your account login with anyone.

   One action: Create your StudentAid.gov account and put the FAFSA opening date and your state deadline in your calendar.

2. Lesson 2: Student loans: know what you signed

   Federal loans and private loans are different products. Federal loans carry fixed rates set by law, income-driven repayment options, and forbearance protections. Private loans do not have to offer any of that.

   • Subsidized federal loans do not accrue interest while you are enrolled at least half time; unsubsidized loans do, and unpaid interest can be added to the balance later.
   • Borrow per year against the whole degree, not one semester at a time. Total borrowed under roughly one year's expected starting salary is a common rule of thumb, not a guarantee.
   • Know your servicer, your rate, your balance and your first payment date before you graduate. Grace periods are short and default is expensive.

   Simple example

   $27,000 borrowed at 6% on a ten-year plan is roughly a $300 monthly payment — before rent, before a car, before food.

   Mistake to avoid

   Taking the full amount offered because it was offered. Refund checks spent on lifestyle are the most expensive money you will ever borrow.

   One action: Log into your federal aid account and write down your total balance and rate today.

   Debt freedom journey

3. Lesson 3: Repaying federal loans under the new rules

   A federal law passed in 2025 changed student loan repayment. For federal loans first made on or after July 1, 2026, borrowers choose between a standard plan with a fixed payment (10 to 25 years depending on the balance) and the Repayment Assistance Plan (RAP), where the payment is based on income.

   • Borrowers with older loans in earlier income-driven plans are being moved to the remaining options over the next few years. Watch for notices from your servicer and confirm your plan at StudentAid.gov rather than relying on social media.
   • The same law ended Grad PLUS loans for new borrowers and set new caps on graduate and parent borrowing. If graduate school is in your plans, check what you can borrow before you enrol.
   • Whatever plan you are in, the fundamentals do not change: know your servicer, keep your contact details current, and never simply stop paying — talk to your servicer first if money is tight.

   Simple example

   A graduate earning $40,000 compares a fixed standard payment with an income-based RAP payment. The lower payment protects the budget now; the standard plan usually costs less interest in total if the budget can carry it.

   Mistake to avoid

   Ignoring servicer mail because the rules seem confusing. Missed notices are how people end up in the wrong plan or in default.

   One action: Log into StudentAid.gov and write down your servicer, your loan types and the plan you are in.

   Debt freedom journey

4. Lesson 4: Budgeting on an irregular income

   Student income is lumpy: aid refunds and summer jobs arrive in chunks, expenses arrive monthly. The job of a budget here is to spread the lumps.

   • Work out a monthly baseline — rent, food, phone, transport — then divide each lump sum by the months it has to cover.
   • Keep a separate account for money that is already spoken for. Seeing a large balance in your everyday account is what causes it to disappear.
   • Track the two categories that actually move: food ordered in and subscriptions. They are where most student budgets quietly leak.

   Simple example

   A $3,000 summer paycheck covering nine school months is $333 a month, not a $3,000 balance.

   Mistake to avoid

   Treating an aid refund as income. It is usually borrowed money with interest attached.

   One action: Split your next lump sum by the number of months it must last, and move the difference out of reach.

5. Lesson 5: Internships and paychecks: W-2 vs 1099

   As a W-2 employee, your employer withholds taxes for you. As a 1099 contractor, nothing is withheld and you owe self-employment tax on top of income tax.

   • Unpaid internships are legal only under narrow conditions in the US. If you are doing the work of a paid role, ask what the position is classified as.
   • Negotiating a stipend or hourly rate is normal, even for interns. So is asking whether housing or travel is reimbursed.
   • Keep every offer letter, pay stub and expense receipt for the year. They matter at tax time and if pay is ever wrong.

   Simple example

   A $6,000 summer 1099 contract can owe roughly $850 in self-employment tax alone. Setting aside 25–30% as you are paid avoids an unpleasant April.

   Mistake to avoid

   Spending 1099 income as if it were net pay. No one withheld anything for you.

   One action: Ask your next employer whether the role is W-2 or 1099 before you accept.

   Tax savings calculator

6. Lesson 6: Taxes for students: filing, credits and refunds

   You may need to file if your income passes the filing threshold — and it is often worth filing anyway, because withheld tax comes back as a refund.

   • Education credits can be significant. The American Opportunity Tax Credit and the Lifetime Learning Credit have their own eligibility rules, and only one can be claimed per student per year.
   • Whoever claims you as a dependent generally claims the education credit. Coordinate with your parents before either of you files.
   • Form 1098-T from your school reports tuition; 1099-INT, W-2 and 1099-NEC report other income. Wait for all of them before filing.

   Simple example

   A student who had $600 withheld across two part-time jobs and files a simple return gets most or all of it back — money left behind if no return is filed.

   Mistake to avoid

   Assuming filing is only for people who owe. Skipping it can forfeit both withholding and refundable credits.

   One action: Check whether anyone claims you as a dependent before this tax season starts.

   Tax strategies

7. Lesson 7: Building credit in college, safely

   A student credit card used for one small recurring charge and paid in full each month builds history with almost no risk.

   • Utilization is measured against your limit. A small limit means even modest spending reports high, so pay before the statement closes if you want a lower reported number.
   • Applying for several cards in a short window creates multiple hard inquiries and a thin, young history — both work against you.
   • Campus card offers with free merchandise are still credit agreements. Read the interest rate and annual fee before signing anything.

   Simple example

   Put a $12 subscription on the card, autopay the statement in full, and do nothing else. After a year you have twelve months of perfect history.

   Mistake to avoid

   Carrying a balance on purpose because you heard it 'builds credit'. It does not — it just costs interest.

   One action: Set autopay to the full statement balance on any card you hold.

8. Lesson 8: Student loan and scholarship scams

   Scammers follow the news. Every change to student loan rules brings calls, texts and ads promising faster forgiveness, lower payments or a special program — for a fee.

   • Everything you can do with a federal loan — change plans, consolidate, apply for forgiveness — is free through StudentAid.gov and your servicer. A company charging up front is selling you something you can do yourself.
   • Never share your StudentAid.gov login. Anyone with it can change your plan, your contact details and where your notices go.
   • Scholarship scams sound like 'guaranteed or your money back' or 'you've been selected — just pay the processing fee'. Real scholarships do not charge you to apply or to receive the award.

   Simple example

   A text says your loans qualify for 'immediate forgiveness' if you call today and pay $399. Your servicer and StudentAid.gov show no such program — because it does not exist.

   Mistake to avoid

   Trusting a caller because they already know your school, loan balance or servicer. That information is often bought or guessed.

   One action: Save your servicer's official phone number in your contacts so you can always call back yourself.

9. Lesson 9: Roth IRA basics while you are in a low bracket

   A Roth IRA is funded with money you have already paid tax on. Qualified withdrawals in retirement, including growth, come out tax free.

   • You can only contribute if you have earned income, and only up to the lower of your earned income or the annual limit set by the IRS that year.
   • Student years are usually your lowest-tax years, which is exactly when paying tax now and never again is most attractive.
   • Contributions (not earnings) can generally be withdrawn at any time without tax or penalty — one reason a Roth is a reasonable first account, though it works best untouched.

   Simple example

   $1,500 earned at a summer job, $1,500 contributed, invested broadly and left alone for forty years, compounds into many times that — with no tax on the qualified withdrawal.

   Mistake to avoid

   Opening the account and leaving the cash uninvested. Contributing is step one; choosing an investment inside it is step two.

   One action: Check this year's IRA contribution limit and whether your earned income qualifies.

   Compounding calculator

10. Lesson 10: Renting and your first apartment

    Landlords commonly want gross monthly income of about three times rent, plus a deposit and often the first month up front. Budget for move-in costs, not just rent.

    • Read the lease for the parts that cost money later: early-termination terms, subletting rules, who pays which utilities, guest and pet policies, and how the deposit is returned.
    • Photograph every room, including damage, on the day you move in and email the photos to yourself and the landlord. That record is what gets deposits back.
    • Renters insurance is cheap and covers your belongings and liability. The landlord's policy covers the building, not your laptop.

    Simple example

    $1,100 rent typically needs about $3,300 gross monthly income, plus roughly $2,200 at signing before a single piece of furniture.

    Mistake to avoid

    Signing with a roommate without agreeing in writing who pays what and what happens if someone leaves. Joint leases make each person liable for all of it.

    One action: Write your true all-in housing number: rent, utilities, internet, insurance, transport.

    Fragility test

Educational content only. Nothing here is tax, legal, investment or insurance advice. Speak to a CPA, attorney or licensed adviser before acting.