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Financing a Higher Education, Part I

Having earned three different degrees and now working as an Academic Advisor, I’ve definitely changed my perspective on student loans and issues related to financing education.  Even though I have ended up focusing my debt elimination strategy on reducing my credit card loan debt first, my student loan debt is what originally propelled me into the Project Money challenge in the first place.  Therefore, I feel it’s appropriate to spend a few blogs talking about “what I wish I’d known” prior to starting my educational journeys.  (Note: many of these ideas were originally generated by email and phone conversations I had with Amy Crowe, Financial Education Specialist for Summit Credit Union).

For this blog, let’s talk about what I wish I had done or knew (or what I now wish my students knew) BEFORE beginning college (or graduate school):

  1. Work during high school and save a portion of your earnings.  It’s a personal philosophy of mine that all high school students should have some sort of job, be it a regular baby-sitting gig, an evening/weekend position, or something they do over the summer.  Honestly, I see no reason for a student would graduate from high school with no work experience and no money of their own to their name.  Work teaches a student personal responsibility as well as financial responsibility, since I think it’s important for students to also begin being responsibility for small “bills” (i.e. paying for their cell phone, gas money, movies with friends).  Too often, I see high school students viewing their work money as completely disposable income (I was one such student), so they do not save for larger expenses (like school).  A portion of each paycheck should certainly go into savings and this can be used for future school expenses.
  2. As a family, talk about the costs of school and decide how school will be financed.  It’s my experience as an academic advisor that most first year students have little understanding of the costs of college and the reality of how it is being paid.  Since tuition costs seem to be rising exponentially, I think it’s important for families to discuss this cost (as well as room and board) and try to compare different options.  Having now worked at UW-Waukesha for a number of years, I am a full supporter of beginning at a community college and then transferring to a four-year school.  I witness on a daily basis just how much money students are saving in tuition, room, and board expenses even by choosing to stay just one year on our campus!  When it came time for me to enter college, my parents agreed that they would pay for room/board costs if I paid for my tuition (for undergraduate; for graduate school, I paid entirely on my own).  This incentivized my desire to seek out scholarships and try to minimize the loans I needed for undergrad.  My parents made this agreement with each of my siblings.  I didn’t realize the ingeniousness of this idea (I’m not sure how much my parents did either) until one of my siblings wasn’t doing so well in school and my parents pulled the funding of room and board; my sibling essentially had no choice but to move home, transfer schools and study under my parent’s roof (where they subsequently began getting a 4.0).
  3. For parents, set up a 529 plan early in a child’s life.  Again, with rising costs of school, a 509 plan can help alleviate the burden of costs down the road and reduce the number of loans taken out.  Even by just setting aside $25 or $50 a month, this type of fund can grow to a substantial amount.  Grandparents and other relatives can also open a 529 plan in a child’s name; perhaps  annual contributions could be made in place of holiday or birthday gifts.  Every little bit helps.
  4. Fill out the FAFSA regardless of what you earn.  I often see students in my office who are scared about their finances.  It’s a good thing for them to be concerned about incurring debt and wanting to avoid loans; however, many of these students have been told by their parents that they are “not eligible” for financial aid because their family “makes too much.”  This is a false statement; there is no such thing as “making too much!”  More than likely, the parents are misunderstanding the difference between grant and loan aid and, yes, there are income ceilings for grant aid eligibility.  But, just about any student (there are a few exceptions) can get at least an unsubsidized loan.  While I certainly do not encourage a student to take out loans if they do not need them, I do encourage all families to fill out the FAFSA to see what they’re eligible for and to have the option.  After all, we never know what the year may hold for ourselves.  And, if a family runs into financial difficulty and cannot pay the way they had originally intended to, it’s nice to have the option of taking out a loan.
  5. Apply for scholarships!  I was fortunate enough to get a number of scholarships during my undergraduate years.  What many of my fellow students didn’t realize is that I was getting these scholarships mostly because others weren’t applying for them!  I have also served on the scholarship committee at my school and, even given my experience from my undergraduate year, it’s surprising how many students don’t apply for scholarships.  I’ve read a few statistics in the past about the financial efficiency of applying for scholarships, and while I can’t quote them verbatim, the general gist is that if someone spends 30-50 hours filling out scholarship applications and writing scholarship essays, even if they only receive one or two scholarships, they’ve usually made more money from the scholarships than had they spent those hours working a part-time job (not to negate my claim in lesson #1).
  6. Explore alternative ways to achieve your goals.  As I mentioned in lesson #2, attending atraditional four-year residential university is not the only way to pursue a higher education.  Students beginning at a technical or community college and transferring is becoming a very common occurrence now.  And, in fact, a bachelor’s degree is not necessarily for everyone; perhaps a technical associate’s degree is a better fit for one’s career path (and usually much cheaper).  Joining the military or accepting public service grants (such as Americorps) are also ways to have a portion or all of your education paid for.  One thing that I am still kicking myself for is not doing more research and applying to more schools for graduate school.  Had I done so, I likely could have found a school that would have paid 100% of my tuition through a graduate assistantship.  Unfortunately, hindsight is 20/20.



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Katie, so I am very curious, what would you have told your 16 or 18 year old self about money management? What would have helped you make different choices? Some parents put savings in custodial accounts called UTMAs (Uniform Transfers to Minors Act)so kids don't have access to the money as minors. Right now, our kids are really responsible about saving and spending. I'm hoping they can carry that through their teens. Thanks for sharing this helpful summary.

I would have told myself to split my paychecks into three categories: give (10-20%), save (40-45%), spend (40-45%). This would have helped me prepare for the need to always save some money (since as a teenager, it's easy to think of your money as completely disposable income). Thanks for pointing out my 509 vs. 529 error. It should be fixed soon!

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