Affording College: Before, During, and After


hand-1840039_1920By Beryl Jantzi

There is an old adage that says, “The best time to plant a tree is 20 years ago. The second best time is today.” The same could be said about preparing for the financial realities of paying for college.

Preparation is not a once and done exercise. Preparation is ongoing. One misconception is that preparing for the financial obligations of college is only about saving beforehand or paying off debt once you graduate. In reality, there are several points along the way to redouble your efforts to get as good an education as possible in the most cost-effective way as possible.

There are three stages in Affording College, and each includes proactive steps you can take throughout this journey.

1. Before: for perspective students

  • Know what financing is available. Educate yourself about:
    • Federal loans
    • Private loans
    • Subsidized and unsubsidized loans
  • Shop and Compare:
    • In state vs. out of state costs
    • community college vs. state university vs. private school costs
  • Budget now:lawn-mower-938555_1280
    • Get information on tuition and living expenses for various schools and on campus and off campus costs for various regions of the country
    • Parents: Start 529 plans as early as possible
    • Youth: Consider part-time jobs and summer work to save for college
    • Monitor your debt from year to year
  • Apply, Apply, Apply:
    • Research sources of grants and scholarships, and business scholarships available through parents employers and local civic organizations
  • Do your homework on career interests:
    • Know the first year earning potential of your career of choice to help determine how much you can/should borrow. (Rule of thumb: borrow no more than the entry income of your career of choice)

2. During: for current students

  • Don’t stop looking for scholarships:
    • Scholarships are not just for freshman
    • Return to organizations that may have turned you down for your first year and reapply
  • Don’t take all the loans you qualify for unless you absolutely need to. Borrow as little as necessaryapple-1851464_1280
  • Look for entry level internships for your career and major. Experience will matter
    when it comes to interviewing for work
  • Always know what you owe:
    • Monitor your total debt from year to year
    • Set a limit on what you can borrow based on your career of choice and your first year earning potential

#3 After: for those entering the working world

  • Know the repayment options for all your various loans
    • Prioritize increased payments for highest interest loans and aggressively take on one loan at a time while paying minimum amounts on the others
    • Discuss consolidation of private loans to lower interest payment. Do not consolidate Federal loans which typically have lower interest rates
    • If you are struggling to make payments, do not stop making payments without talking directly with your lender. Forbearance options exist
    • If you can accelerate payments it will reduce total interest paid over the length of the loan

If you find these guidelines helpful, consider viewing three short videos related to these three stages at www.everence.com/college. They are based on the lives of Carol, Erica, and Justin. Each of these students will speak in more detail to the realities of each stage of your college experience.

For more information contact me about additional resources to help you with your college journey at beryl.jantzi@everence.com.

About the Author

Beryl Jantzi and familyBeryl Jantzi serves as the stewardship education director for Everence, a faith-based financial services company of Mennonite Church USA, which serves all who are interested in integrating their faith with their finances.

Managing Debt

A new part of the COMPASS resources this year are live chats with thought leaders on the month’s theme featured on the blog. During March, COMPASS has focused on “Managing Debt: Loans and Money in March.”

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

This past week Sandy Crozier presented on Managing Debt offering tips and ideas for how to repay debt, have emergency savings, and to be financially fit. The recording of the chat is available here to watch the discussion and gain Sandy’s wisdom.

Please note, as this was the first COMPASS Live Chat there were a few technical issues in the first 5-10 minutes of the recording, but after that, it worked well.

Enjoy the presentation, and please share any thoughts, questions, or comments on the topic that you may have here in the questions and we’ll continue the faith and finances conversation about managing debt together.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Managing Debt: Loans and Money in March

As the calendar turns to March, COMPASS is focusing on debt management this month. You will hear perspectives from financial advisors, debt experts, and faith based financial voices as well. As we set the stage for this conversation, it is important to briefly articulate some of the different types of debt we might face.

debtCredit Card Debt

A couple of years ago, about 6 out of every 10 millennials did not have a credit card. Since then, that ratio has changed somewhat. One thing that does seem clear is that millennials as a generational group lack some credit card knowledge, especially as they relate to credit scores.

Student Loan Debt

Among Millennials, student loan debt is a major generational challenge because of the well-documented increase in the cost of education over the past two decades. Natalie Kitroeff recently noted “Four Ways Student Debt is Wreaking Havoc on Millennials.” Natalie notes that:

  • Student debt seems to dampen home buying
  • Young people are delaying starting families
  • Millennials are saving less than they could be
  • College loans make it hard to be financially healthy

How do we manage these and other kinds of debt? How do we faithfully give and live when facing the reality of debt?

These are questions that there aren’t easy answers to. For example, most of the above observations are true for my wife Allison and me. We have found that it is most helpful to remember the reasons for the debt in the first place.

We have yet to buy, or even look for a home because of our educational and vocational plans as we prepare to be a pastor (Allison) and a rostered leader in ministry (me). We have taken on this debt largely because we believe that our education matters, and that we are called to serve in capacities where an education will be invaluable. So in this sense, these loans are and remain an investment on our part in our present and future.

Conversations about Debt

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

Sandy Crozier, Stewardship Development Director of The Free Methodist Church in Canada

This month COMPASS is beginning a new initiative offering a monthly conversation in real-time on the month’s theme. The first conversation will center on topics related to debt and how to manage it. It will be held on Tuesday March 22nd at 8pm EDT/5pm PDT. Sandy Crozier will be our topic leader. Sign up for the Live Chat at https://stewardshipresources.org/compass-live-chats. If you have questions that you would like to discuss, please let us know in the comments, via Facebook or Twitter, or by email.

What questions do you have about debt and managing it?

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: Debt

Frugal Tips for Recent Graduates

During the month of May COMPASS  has been giving space for conversations and questions about “What’s Next?” Specifically we are thinking about budgeting and student loans during and after graduation and the life transitions that commonly begin during this month. Today we welcome back Grace Duddy Pomroy to the blog. This post previously appeared on Grace’s blog, and is adapted and used here with her permission.

graduationIt’s the time of year when graduation pictures fill Facebook and Instagram: a time of bittersweet endings and fresh beginnings for many people. Congratulations to all of this year’s graduates. I called this post “tips for recent grads” because we are just coming to the end of the graduation time of year, but really this is advice for anyone.

After you have just graduated you experience a significant life transition, making it an easier time to shift your money priorities, but you could certainly make this shift at any time. For young professionals, I am convinced that two of the best things that you can do with your money is to use it to invest in yourself and those you care about through repaying loans and saving.

If you are a recent grad, with student debt it can be tempting to wait until the end of your grace period to start paying your off your student loan. I would encourage you not to wait. When you get a full-time job and begin creating your budget, put your student loans in your budget right away. There are many online calculators that can help you figure out your monthly payment amounts for your loans. If you can’t afford making the payments right away, consider just paying the interest on the loans during your grace period. Any little bit will help in the long run.

After you move out of your grace period, get on a payment plan that works for you. If you can afford to pay at least the minimum on all of your loans, do it. Check into consolidation and income-based repayment plans if you qualify. Then make a plan to get out of debt.

Snowball

Snowball

I have a plan to pay off my student loans in 5 years (half of the recommended time). I am using the snowball method to get out of debt faster. I began by paying off my two smaller loans ($2,000 or less). I paid off the first one within a little over a year of graduation and then put the minimum payment from that loan towards the next smallest loan. Within about six months, I paid off the next smallest loan. Now, I am putting the money I had been putting towards that second smallest loan towards my next smallest loan which also happens to be the one with the most interest. I hope to pay off this loan with in the next year or two. Coming out of grad school, I felt overwhelmed by my debt and needed some quick wins so I started with my smallest loans. However, the smarter choice would have been to get rid of the highest interest loan first.

During a research project, I spoke with a man in his thirties who told me that he and his wife had decided not to focus too much on paying off their debt but instead to take this time to enjoy other opportunities, particularly travel. There is certainly a balance between enjoying your 20s and 30s vs.  paying off your loans quickly. You have to find the balance that is the best fit for you, your values, and priorities.

Once you have a plan for your debt in line, you can begin thinking about savings. Regardless of your debt level, you should always leave space in your budget to build up your emergency fund and long-term savings, even if it is just $20 a month. Beyond that you can begin to think about short-, mid- and long-range savings goals. Short-term goals (two years or less) might be saving for a vacation, computer, car, or even a wedding. Mid-range goals (five to even twenty years out) might include saving for house, dream vacation, a child’s education, etc. A long-range goal is generally retirement or another 20+ year goal. At this point in my life I am focused on short and long range goals, saving for my emergency fund, retirement as well as doing some fun short-term savings. There is almost nothing more financially rewarding than continually investing in a savings fund and achieving your goal.

When you are focusing on paying off debt, especially a large amount of debt, it can be tempting not to save. In most cases, this would be a mistake that could really cost you. It is important to have some emergency savings (3-6 months of income saved) or at least a modest rainy day fund ($1000+) before charging full speed ahead on your debt. While this may seem like a road block in the way of paying your debt, if you don’t have an emergency or rainy day fund any unexpected expense like an unanticipated car repair, medical expense, or travel expense can really throw off your budget and your debt repayment plan by adding more debt. Saving and paying off debt is a delicate balance but it is doable and worthwhile.

Join the Conversation: What is your plan for repaying and saving?

Grace headshotAbout the Author: Grace Duddy Pomroy is a Financial Education Specialist at Portico Benefit Services and previously served as Executive Director of Operations at Kairos and Associates, and Assistant Director for the Center for Stewardship Leaders and Luther Seminary. She is author of “Stewards of God’s Love”, recently published by the Evangelical Lutheran Church in America. She blogs regularly and you can follow her on Twitter.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credits: Sea of Graduation of Caps and Snowball.