In a perfect world, I'd do one of two things:
1) I would buy it, after carefully negotiating the price considerably lower, and then stick it in my garage until I was done with school (or until summer) and then attempt to work on it, assuming I could learn how to do and know what I was doing;
or, and I like this one better from my point of view:
2) I would convince someone local (or semi-local) to buy the car, for less than what the guy's asking of course, have them do any repairs on it, and then when I finish school, I'd buy it from him, even if the price is a bit higher, but at least the car would be in a lot better condition than its present state, and I wouldn't have to worry about sinking my money (or my grandma's) into a money pit...
In the meantime, either way, I think I'm going to put some of my money into a CD or something that'll accrue significantly more interest than my sorry checking account (don't get me wrong, there's money there, just not much interest). That way I'll be earning some kind of return on my hard-earned money.