College Costs
Last updated: January 12th, 2024

Understanding Your Life Budget

Learn why budgeting for costs is so important

College costs are usually split in two distinct categories: 

  • #1: The designated fees that will be paid directly to the college. These are also referred to as: direct costs or college bills. These costs will usually include tuition and fees, and room and board costs. 

  • #2: Designated fees and costs that you will need to budget and pay for out of pocket. These can also be referred to as “indirect costs” or a life budget. These costs usually include personal expenses, books and supplies, travel, transportation costs, food, etc…

In DecidED, you will see these costs listed as College Bill (direct cost) and Life Budget (indirect cost). Once you’ve uploaded your award letter to a college, DecidED will show you the amount left you will need to pay for your college bill and the amount left for your life budget.

What are life budget numbers and where do they come from? 

Most colleges provide life budget estimates within student award letters. You can also find this information on financial aid webpages. These numbers are estimated amounts based on average out-of-pocket student expenses. If a college does not provide this information, rest assured that DecidED will provide a conservative estimate of these numbers for you. This information is critical for your college planning.

Tip: Make your financial plan using life budget estimates. With proper planning, it is possible to minimize these expenses. Here are some examples: instead of buying new textbooks, buy used ones through Chegg. Opt out of having a car on-campus. Instead, take advantage of low cost or free campus transportation and transit discounts. If you have an on-campus meal plan, utilize the cafeteria instead of going out to eat and spending money at restaurants.

What exactly is included in a “life budget”?

Generally, most students can expect the following costs to be under the College Bill and Life Budget categories:

College Bill (Direct Cost) 

  • Tuition
  • Fees
  • *Housing & Meals (Board)
  • *Health Insurance

*Depending on a student’s circumstances, these costs may show up under College Bill or Life Budget.

Life Budget (Indirect Cost) 

  • Personal Expenses
  • Books, Equipment/Lab Material
  • Transportation

Housing and meals

In certain circumstances you may choose to live at home or live in off-campus housing. 

  • When this is the case, housing and meal costs won’t be included in your college bill. Instead you will be responsible for managing and paying for expenses such as rent and meals. You will need to plan accordingly since these costs can vary.
  • If you decide to live at home, will you be expected to contribute to rent and groceries? If so, plan to account for these expenses in your life budget.
  • Off-campus housing can include renting an apartment by yourself or with roommates, or renting a room in a house.
  • NOTE: DecidED includes your housing costs in our affordability calculations, whether or not you are paying them directly to the college.
  • Have more questions? Check out Housing and Meals Explained.

Health insurance

Most colleges require that you have adequate health insurance. If you don’t have proof of health insurance, you may be automatically enrolled into the college health insurance plan, which can range between $1,500 – $2,500 a year. 

If you are already covered under your parents’ insurance, make sure to take the necessary steps to fill out your college’s waiver to avoid health insurance charges. Support may be available at your college in covering this expense. Make sure to reach out to the financial aid office to find out more.

Tip: We recommend budgeting $500 for an emergency fund for any unexpected expenses. Remember to refill this fund with earnings from work.

What is an “emergency fund”?

An emergency fund is a safety net that you can use to avoid leaving school or resorting to taking out more loans. An emergency fund can help you avoid making rash decisions due to a lack of funds. Even $500 saved in a checking or savings account can get you out of many financial emergencies.

If you lack an emergency fund but end up in an emergency, contact your campus’ student support services. These services may provide emergency funding depending on the student circumstance.

Do I really need to have an emergency fund?

An emergency fund is optional, but highly recommended. We also encourage students to continue to search and apply for scholarships even while you are in college. 

Our team interviewed 90 college students at different college campuses viewed 90 college students at different college campuses across the country. Here are some of their stories about times when they either used their emergency fund to get out of a tight situation or didn’t have an emergency fund and wished they had one.

Tip: The best place to keep an emergency fund is in a bank account.

Five instances when you’d need an emergency fund

If your car breaks

When Brenda was a sophomore, the belt in her car broke, costing her $200. She needed the car to get to classes but she didn’t have enough money saved up to cover this repair. Fortunately, her paycheck arrived the next day and she was able to get her car fixed without it affecting her ability to get to class. But after that close call, she realized she needed to build up an emergency fund.

If you experience a medical emergency

When Eric was a junior, he broke his leg playing soccer with his friends. He suddenly needed to cover medical bills, couldn’t work at his job in the campus cafeteria anymore, and couldn’t drive his car. He ended up taking expensive Uber rides to get places. Eric was a money mentor at his college so he knew it was important to have an emergency fund so he had one ready. Through his experience, he realized that small things that aren’t in your control can quickly spiral into big money stress.

If you need to pay for an unexpected expense

Camilla’s parents grew up in Belize. She was the first in her family to go to college in the United States. She had to figure out everything on her own; she thought her textbooks were covered in the bill she paid the college. Unfortunately, she didn’t realize she needed to budget to buy books on her own. She didn’t have an emergency fund for books, so she had to go to the college’s financial aid office to get a last-minute short-term loan for $300.

Tip: You probably did not know that you have to pay for textbooks in college. There are likely other unexpected expenses that will pop up. If you are the first in your family to go through the college process, be ready for surprises. Reach out to support programs for first-generation college students or support programs for freshmen.

Tip: Dramatic changes in your family’s financial situation will impact your college costs. Having an emergency fund (whether through your own savings or through small amounts of loans) can help mitigate these changes.

If your parents start making more money

Deja’s father’s income increased after her first two years in college. As a result, the amount of grants in her financial aid package decreased. Deja didn’t realize this change until she saw her “refund check”—a check she receives at the beginning of each semester, which she used to cover books and other college expenses. Her check went from $534 per semester to just $22. Deja didn’t like to be surprised, so she made a plan. She took out a loan that would cover her books and also left some “wiggle room” for emergency expenses.

If you are enrolled in school longer than you anticipated

Between grants and big scholarships, Kiante didn’t have to pay for anything during his first four years at college. However, when he changed his major from Psychology to Biological Engineering, he needed to attend college for a fifth year. It wasn’t until the end of his fourth year that he realized all of his scholarships expired and would not cover his fifth year in school. He ended up having to take out a $30,000 loan to cover his last year of college. He wished he had saved up a little more during his first couple years of college.

Tip: There are a lot of reasons why college may end up taking you longer than you think. Emergency funds can help cover tuition for extra semesters.

“Scholarships… usually cover more than you need. It’s not until you have financial trouble that you start to pay attention… It happens at different times (for different people)… If you want to manage your money, you have to treat it like any other hobby because (circumstances) always change.”

– Senior College Student, Kiante