Coping with the Costs of College
Managing Money, Minding the Future
by Chia-Li Chien, CFP®, PMP® Oct 15, 2016
According to the U.S. News 2016 Higher Education rankings, Ball State University (BSU) ranked 176th among national universities and top 93 public schools with a 41% four-year graduation rate. But that contrasts with Indiana University, which has a 60% four-year graduation rate. Recently the BSU student newspaper interviewed me regarding the biggest money mistakes students make. The biggest one is students taking too long to complete a bachelor’s degree. This is unwise, except for students in double majors, or who are bridging courses to qualify for a professional certificate exam such as CPA, PE, etc.
The cost of a bachelor’s degree should not be a future burden—a tip especially aimed at those taking out student loans. Even if your parents or someone else has the burden of paying your tuition, it is crucial to prioritize completing your degree within four years. The longer you are undecided about your degree, the more it’s going to cost. Time is money; it’s an unnecessary waste for students to prolong degree completion. Students should consider seeking counsel from an advisor or chair of the relevant department to set a 4-year graduation schedule.
According to Student Loan Hero, “the average Class of 2016 graduate has $37,172 in student loan debt.” Students and/or parents may not fully understand the financial aid offerings. Financial aid has two parts: 1) grants, in return for which you don’t owe anything, and 2) student loans, which you need to pay back. Grants may include Pell grants, federal, state, or university grants. Student loans may include the following: Stafford Subsidized, Stafford Unsubsidized, Grad PLUS, Parent PLUS, and Perkins. These are loans and you need to pay them back plus interest. The loans cannot be forgiven even if you file for bankruptcy.
Student Struggle with Money
Many students work part-time; however, not all of them need the money from part-time work. For example, June came to my office to inquire about obtaining a part time job. June mentioned that it’s nice to have extra money from her part-time job at the coffee shop. I asked June, what would that extra money do for her? She told me, just buying nice clothes, computer apps, etc.
Students’ top priority should be getting the best GPA possible and leveraging that toward a solid career track. If work is necessary to supplement your tuition and other expenses, then align your part-time job with your future career goals. For example, if a student majored in Hospitality Management, working in a restaurant seems to be aligned. However, if your goal is to become a CPA, working as a waiter may not be aligned unless you provide accounting services for the restaurant. My daughter has been a paid research intern in the Meat Science Lab on her campus for the past two and a half years. This part-time job not only helps her gain experience but also positions her well for her future career. Her aspiration is to become a professor and researcher in Meat Science.
If you’re a student struggling with money, don’t buy things to make you feel good. Do yourself a favor; stop pretending that you are a million bucks, when you’re not there yet. Conserve and save as much as you can to help you build good money habits. Don’t confuse conserving and saving with being cheap. There is no shame in conserving or saving; every millionaire I know is great at conserving and saving, and proud of doing so. They don’t even look like they are rich--and that’s their secret.
Need Help on Financial Literacy
Many Universities require a personal finance course to graduate with a bachelor’s degree. Besides this helpful course, students should have a role model or mentor. A role model or mentor is someone who has been successful in life, accumulated wealth and has excellent money behavior. Watch and learn from how the mentor became successful in life. A mentor can be someone like a close relative, business acquaintance, or even one of your professors. The best way to learn financial literacy is learning by doing.
For example, many years ago, Mathew’s mom asked me to mentor him. Matthew had just received his MBA and was a campaign manager for a major political party in New York. He asked me how he should invest in the stock market for his future. I asked him, how much in student loans or credit card debt did he have outstanding? He indicated that he had about $23,000 in total debt. I told him that he didn’t qualify to invest unless he was debt-free and had a 3-month emergency fund saved up. In three years, Matthew became debt-free and had saved a 3-month emergency fund. Anything is possible as long as you set your mind to it.
There are plenty of resources for financial literacy out there. The Foundation of Financial Planning http://www.foundation-finplan.org/ has centralized resources for everyone. There are brochures, literature, and even games to help you get into the right financial shape. In addition, Pro Bono counseling is provided on a volunteer basis by Certified Financial Planners like myself. There are many volunteers nationwide. Taking a small step to ask for help will greatly increase the possibility of success in life.
Most people or students work (“work” also encompasses going to school full time) about 8 to 10 hours a day, yet we spend money over 24 hours. As long as you have utilities and a cell phone on, you’re spending non-stop even when you are asleep. Money or personal finance does not have to be complicated. Students are supposed to graduate within four years at a bachelor’s degree program. A student’s job is to do the best they can to obtain the highest-possible GPA. Graduating on time and with a high GPA shows a student’s diligence and consistency of work ethic. These important qualities help students stand out when applying for jobs or graduate schools, or even creating a start-up company.
U.S.News. (2016, September 12). How Does Ball State Rank Among America's Best Colleges? Retrieved September 15, 2016, from http://colleges.usnews.rankingsandreviews.com/best-colleges/ball-state-1786
Student Loan Hero. (2016). A Look at the Shocking Student Loan Debt Statistics for 2016. Retrieved September 15, 2016, from https://studentloanhero.com/student-loan-debt-statistics-2016/
CollegeBoard. (2012). Four Year Graduation Rate for Four-Year-Colleges. Retrieved September 15, 2016, from http://media.collegeboard.com/digitalServices/pdf/professionals/four-year-graduation-rates-for-four-year-colleges.pdf
Chia-Li Chien, CFP®, PMP®; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward. Chia-Li is an Instructor & CFP® Program Director at Ball State University and Adjunct Faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Schedule your appointment today!