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September 16, 2020

What Should You Do with Work-Study Money?

It’s exciting to hold a paycheck in your hand or see a direct deposit appear in your bank account. What do you typically do with the money you earn? Save it? Use it to buy clothes or cool tech? 


What about when you earn work-study money from the college you attend? You’re guaranteed to earn at least the federal minimum wage of $7.25 an hour. The average amount families use to pay to college is $1,847, according to Sallie Mae’s 2020 report, “How America Pays for College.”


Work-study is generally meant to help with day-to-day expenses and may not be enough to cover large costs like tuition and housing. Knowing that, is there one thing in particular you should use it for? Let’s analyze the different ways you can use work-study money. 

What is Work-Study? 

First of all, what is work-study? Federal work-study is a way you can earn money through part-time on-campus jobs. (You may be able to get off-campus jobs as well.) However, not every school participates in the Federal Work-Study Program, so it’s important to know ahead of time whether your college participates. Schools that do participate in the Federal Work-Study Program have a specific amount of funds they can award to you as long as you’re eligible. 


You’ll receive your funds in a paycheck as you earn them, based on the hours you work — very similar to any hourly job.

How to Get Work-Study Money

You must fill out the Free Application for Federal Student Aid (FAFSA). If you’re a senior in high school, it’s a great idea to get the FAFSA completed as soon as you can (on or before October 1), because some schools award work-study funds on a first-come, first-served basis.


Your work-study award will appear in your financial aid package and includes the limit you can earn for the year.

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What Kind of Work Can You Do? 

Colleges typically offer many work-study jobs in various areas of campus. These may include: 

  • Library assistant 
  • Office assistant 
  • Admission tour guide
  • IT worker
  • Tutor
  • Fitness center worker
  • Research assistant 
  • Food service worker

You may also get work-study through a nonprofit employer. You may need to specifically ask about community service work-study positions through your college’s financial aid office or contact the career center on campus.

First Considerations Before You Use Your Work-Study Money

Now, once you’ve earned it, what should you do with your work-study money? 

Know Your Work-Study Limits

How much money will you be able to earn? Work-study maximums look different at every school. The exact amount you can get will depend on your college’s work-study program. The eligible amount can range from $1,500 to $5,000 per year.

You can’t exceed your total Federal Work-Study award. When assigning work hours, your employer or your school’s financial aid office will consider your class schedule and your academic progress.

Understand Your Needs 

What are your needs? How much money must you have in order to support yourself throughout the semester? You may need extra cash on hand for: 

  • College tuition or fees
  • Groceries and toiletries
  • Utilities and other living expenses 
  • Entertainment (movies, going out to eat, etc.)
  • Transportation
  • Clothing
  • Auto insurance


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Spend Some Time Crafting a Budget

You may not be totally sure how to use your work-study earnings — and you may only get paid once per month. Take some time to understand how that money will fit into a larger money plan:

  1. Add up all your ongoing expenses for items like rent, utilities, internet, etc. 
  2. Calculate your monthly income and figure out how much money you have coming in.
  3. Subtract your expenses from your income. 
  4. Figure out how much goes out compared to how much comes in. Make some adjustments if necessary. 
  5. Pencil out expenses — but give yourself some “wiggle room.” Make sure required expenses are paid first, but remember to reserve some money for entertainment, like concert tickets or the occasional pizza! 


Where You Can Put Your Money (and How to Do It!)

You can put your money toward lots of different things. But looking back to the budget conversation, what do you need to pay for? Determine your needs and wants before you make a decision to buy. 

We’ve given you a few things to think about below.

Put Work-Study Money Toward Your Living Expenses 

If you need to pay the utility bill, cable or water for your apartment, your work-study money can go toward that. You may also need money on hand to pay for groceries, eating out, ride-sharing, entertainment, household supplies, bus fare, clothes and more. 


Some of your expenses will vary — but if you have a roommate, it’s a great idea to pool your money and figure out how you can get by without luxuries (like cable!) to save as much as your income as possible. 

Put Work-Study Money Toward School Expenses

Unlike other types of financial aid, work-study earnings are not applied directly to your tuition, room, board and fees. However, you can have the money credited to your account instead of getting paid by check or direct deposit. Make sure you understand how much your work-study money will cover ahead of time (remember, you’re limited by a certain amount per year!).


Check with the financial aid office or your college’s business office to determine how this process works. 

Save Your Money 

Saving your money is always a great option. You never know when you’re going to need to pay for car repairs, medical expenses or some other type of emergency. 


You can save it in many different ways. Regular savings accounts or money market accounts could be good locations to put your money. Check with your current financial institution to learn more about your savings options.


Aim to save as much as you can — just like your grandma always said.

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Invest Your Money

There’s a difference between saving your money and investing it. Saving your money means you put it in a place where it will earn little-to-no interest but stay extremely safe. On the other hand, investing means you’re playing with risk.


Think it’s crazy to consider investing your money during college? Actually, college is a great time to start getting the hang of investing because time is on your side. The earlier you start consistently investing, the more likely you’ll benefit from compounding interest over time. (Compounding interest is interest that builds on itself.) However, remember that you shouldn’t risk money you can’t afford to lose. Investing is riskier than stuffing your money into a savings account! 

Investments Options

Bonds: You lend money to a company or government when you purchase a bond. A bond allows the bond issuer to borrow your money and pay you back with interest. Bonds offer lower returns and you risk that the bond issuer could default on its payments. However, bonds are typically safe investments.

Mutual funds: Mutual funds are pools of investments — you can purchase a large number of investments in one transaction. For example, you may own a mutual fund that contains a bundle of stocks or a mixture of stocks and bonds. You pay a professional manager to invest your money in stocks, bonds or other assets.

Index funds: These funds, which are a type of mutual fund, tracks an index like the S&P 500. An S&P 500 index fund means you hold the stock of companies within that index. Index funds don’t require you to pay a money manager to pick and choose investments for you, so you typically save money.  

Exchange-traded funds (ETFs): These funds are pseudo index funds because they track an index or a collection of stocks. The difference between index funds and ETFs is that ETFs trade on an exchange like a stock — you can buy and sell throughout the trading day. Mutual funds and index funds are priced once — at the end of each trading day.


Where to get them? Look into a broker, robo-advisor or discount broker like Vanguard or Robinhood.

Investments Through Banks or Credit Unions

If you won’t need access to your money, you could also put it into a certificate of deposit (CD). Your financial institution will let you invest in a CD using a prespecified amount of money for a certain amount of time — but your money is “locked up” during that time. You’ll pay major penalties if you take your money out before the CD maturity date. When that time period is over, you get the amount you originally invested back, plus interest. The longer the loan period, the higher your interest rate. 


CDs are FDIC-insured up to $250,000, which means that you’d get your money even if your bank shuts down.


Check with your bank or credit union or check various interest rates on CDs through other reputable financial institutions.

Use Your Work-Study Money to Fulfill Your Needs

Your situation may be different than other students’ — maybe you have a specific hobby, entrepreneurial endeavor, a business or something else that you’d like to use to spend your work-study money. 


Ultimately, you can use your work-study money for lots of things, but don’t discount your ability to learn important job skills! Those soft skills may be even more important than the money you earn.

Photograph of Melissa Brock
Melissa Brock

Melissa Brock is the founder of College Money Tips and is also the Money editor at Benzinga. She spent 12 years working in college admission, then turned to freelancing and editing. Nothing invigorates her more than writing about college and money and helping families navigate the college search process. 

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