00:00 Julie Hyman
All week long on wealth, we’re talking about student loans from signing up to making your first repayment. And according to the college board, current college students are spending an average of just under $3,000 per month and about $26,000 for a nine-month school year. Joining us now is Daniel Roccato, University of San Diego Finance Professor, Credible Money Coach, and Personal Finance Expert. So Dan, thank you so much for being with us, first of all. Um and what are college students spending all this money on? I mean, we know they have tuition, we know they have board, but break it down for us.
00:42 Dan Roccato
Yeah, hi Julie. Thanks for having me back. Um it’s a lot different now than it was when we were in school, I think. You know, so first of all, obviously, everything’s just so much more expensive because of inflation and what not. And what we’re seeing is that college students spend about half of their monthly budget on housing, whether that be on campus housing or off campus housing. So that’s a big chunk right there. About 30% of it goes to uh transportation, getting, or sorry, sorry, food costs, you know, you got to feed those kids in college, right? Uh and listen, they want avocado toast, not ramen noodles. So that’s gotten more expensive as well. Transportation, cell phone, travel, that kind of makes up the other 20%. But all in all, no matter how you look at it, Julie, it’s pretty expensive.
02:01 Julie Hyman
So the loans that and grants and all of the money in financial aid that these kids are getting, are there um requirements or their limits on what they can actually spend those funds on?
02:17 Dan Roccato
Yeah, good question. We have to draw the distinction. There’s two types of loans, as you know, Julie, there’s private and federal. Now, most students go with the federal student loans. Everyone qualifies for a federal student loan, whether you’re Elon Musk’s child or one of my middle class kids, you qualify for a federal student loan. You’re capped annually on how much you can receive from the federal government. And you have pretty broad definition of what you can use it for, education related expenses, tuition, room, board, transportation, a computer, for example. Um an energy drink can qualify, keg party, probably not. So you have to use it for, technically, expenses related to your college experience.
03:25 Julie Hyman
That’s kind of amazing, energy drink, right? If you’re staying up all night studying, I guess. And you uh can justify the expense that way. Um and what are your tips for incoming students who might be worried about their finances?
03:44 Dan Roccato
And that’s the real key. We, you and I have to focus on what we can control. We can’t necessarily control inflation, but one of my tips for all of my students, and my own kids included, limit your borrowing to your expected first year salary. You’re going to become a chemical engineer, go ahead and borrow 90 grand. Studying basket weaving? Change your major. Ignore the sticker price. As you know, there’s there’s the sticker price at the schools, but you know, the big schools with expensive sticker prices are also the most generous schools when it comes to scholarships and financial aid. So forget the sticker price, apply and let’s see what the school comes up with. Work part-time, that’s the key, what and it also, by the way, adds to your resume, your skill set. The best way to pay for college, have somebody else pay it for you. You can work part-time at Walmart, part-time at Starbucks, and they’ll pay for college, right? So check out those employer paid benefits. And finally, Julie, something I called the 2 + 2 strategy. Two years community college, especially for those students, those young adults that are not really quite sure about college yet, right? So it’s a it’s a low-cost, low-impact way to figure out if this is really for you. Two years there, two years to a regular four-year college, you’ll come out with a four-year college degree, and you’ll save a boatload of money.
05:40 Julie Hyman
Yeah, and Dan, it feels like community college is getting a lot more sort of acceptable as college has gotten a lot more expensive. So that makes a lot of sense for people. Thank you so much. Appreciate it.
06:00 Dan Roccato
For sure. Thanks, Julie. Take care.
06:04 Julie Hyman
You too.
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