Use Your Tuition Refund to Get Ahead

This is a guest post from Laura of Green Panda Treehouse. Laura is a twenty-something woman working to improve her finances and reduce debt. She writes about personal finance for college students and grads at Green Panda Treehouse. Be sure to subscribe to her feed so you can get more great content from her.

Some college students in the next few months will be getting some money from their university. After their tuition, room and board, and books have been paid for, there may be money left over from your scholarships and grants. Your tuition refund is a fantastic way to start an emergency fund painlessly.

How much do I need in my emergency fund?

It depends on your circumstances, such as if you’re a single student with little expenses or if you’re going to school while working and taking care of a family. The more responsibilities you have, the more reasons you should have a healthy emergency fund.

Ideally you should have 3-6 months of necessary expenses in your emergency fund. Remember you need the money to cover essential expenses like food, rent, gasoline, utilities, etc. Also include money for items such as possible car repairs and semi annual insurance bills.

Since you’ll need this money in an emergency quickly, consider using a savings account. Don’t put your emergency fund money into the stock market, where returns in the short term are volatile.You need this to be safe and free from you spending it. Many banks have high interest saving accounts you may want to consider. You want this money to grow without putting it at risk.

If you’re currently working while attending college, have a portion of your paycheck transferred to your emergency fund. You’ll become use to the slightly small paycheck as you start savings. Along with your tuition refund, this money will increase your assets without causing a huge drop in spending money.

Build up the emergency fund to the point that if you lose your job, you can survive until you find a new one. If the unemployment problems continue, you may want to be an even bigger emergency fund.

Use it ONLY for emergencies.

I suggest reviewing your financial statements from the bank or using Mint to see what past emergencies have come up. You may see a trend of car related expenses, in which case, you’ll include that into your emergency fund planning. You may also notice that you didn’t have emergencies per se, but you failed to anticipate expenses and were caught off guard.

If you run into a real emergency, then pull just enough money out to cover it. Focus on replenishing it as soon as you can.

Do I pay off debt or use the money for savings?

If you have high interest debt, like credit cards, then tuck away a month’s worth of expenses away first from your tuition refund then go ahead and pay that debt down with the rest of your money. Every semester, repeat the process until you’ve paid off your high interest debt and then use the money to save towards your emergency fund goal.

What of I have no debt and I already have an emergency fund?

Fantastic job! You’re now in a position where you get to decide which goal to pursue next. I’d look at your goals in 5, 10, and 20 years. Depending on where you’re at now in the stream of things gives you an idea of what you should put your money towards.

Which of the following are you planning on doing?

  • Start your own business
  • Getting married
  • Buying a car
  • Buying a house
  • Retire (early)

After you decided on what you’ll probably do, then see what would be the best step. If you plan on owning a home, start setting aside money to make a sizeable down payment. If you want to retire early, invest your money into an IRA. In general if your goal is in less than 5 years, save the money. If it’s longer, like 10 or more years, then invest.

I’d also recommend skimming 10-20% off the top and just splurge. Take a vacation or spend money on your favorite hobby.

Your Take

How have you used your tuition refund?


1 Josh Smith August 31, 2009 at 9:12 am

Great idea, just make sure you don’t do this with money left over on your account from student loans.

2 Stephanie PTY August 31, 2009 at 12:39 pm

Great post, as usual, from Laura! My suggestion, though, once you have an emergency fund, is to start working toward a “getting established fund.” Have money put aside to tackle everything that happens as you transition out of college. From the little things like printing resumes, getting your car registered in a new state if you move, buying suits for interviews, to big things like security deposits and furniture for your first apartment. How much you need in a Getting Established Fund with vary from person to person… but it’s almost always more than you think you need! My own GE fund has been a lifesaver so far!

3 Laura August 31, 2009 at 1:26 pm

Good point Stephanie! You don’t realize how much money you spend just getting started. I’m glad you have a fund ready to go when you graduated.

4 claudia August 31, 2009 at 4:09 pm

Doesn’t anyone proof their blogs before publishing? Very first sentence, typo. I take bloggers a whole lot less seriously when i find posts littered with typos or grammatical issues.

5 Kyle August 31, 2009 at 7:49 pm

Thanks for the comment Claudia, I try my best to proof what I write as well as the posts of my guest authors. I am not, nor do I claim to be, an English major I write abuot finance and money not commas and semicolons. I hope you don’t judge everyone on their use of grammar as it is the content that matters.

6 Alex August 31, 2009 at 9:40 pm

Great advice, Kyle. How much money to pay towards debt vs how much to store in the emergency fund is something I’ve been figuring out since I graduated 4 years ago. Having chosen to save more and pay less on my students loans paid off after deciding to go into business for myself full-time– one of the long term goals you CORRECTLY mentioned!

BTW, thanks again for adding your blog to

7 Ann-Marie September 1, 2009 at 10:40 am

One caveat I would mention is to first make sure that any refund is yours to keep! I had student loans in grad school and one semester I was pleasantly surprised to find out I had won a scholarship. When I got the check, I quickly put it toward some debt I had accumulated. A few weeks later, I got a bill in the mail for the amount of my scholarship. After several phone calls, I found out my scholarship counted as extra income, which reduced the amount of student loans I was eligible for. So I had to come up with cash I didn’t have to effectively pay for the scholarship I had won.

Lesson learned: Make sure it’s definitely yours before you spend it!

8 Jacqueline March 4, 2010 at 11:23 am

Did Claudia not learn that i should be an upper case I… Ms. “Typo” and correct grammar.

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