Borrowing Money for School: An Exercise in Confusion and Mild Panic

I am lucky. I grew up knowing that my parents would pay for my college education. This was not easy for them. I have two sisters, and my parents were committed to sending each of us to college. They worked, and saved, and budgeted, and at times fought over saving and budgeting.

When I wanted to transfer from my affordable and respectable state institution to a fancy and expensive private school, my dad sat me down and explained the reality of that choice. I didn’t fully understand the impact of taking on a lot of student loan debt at that time, but I did understand that student loan debt, or any kind of debt, was Serious Business.

I paid attention. I made it through my bachelor’s degree with zero debt. I worked part time during the school year, and full time during the summers. Just as much as the fact of my going to college was always a given, so was the fact that if I wanted to attend graduate school, I would have to find a way to pay for it myself.

So, I did. I worked full time for a number of years, and when I found a program that I liked, at a school that was close enough to get to in the evenings after work, I applied.

I paid for it in part by taking advantage of my employer’s 50% tuition reimbursement deal, which they honored for a few terms until they realized that someone was actually using that benefit and cut off the funds. I also had some savings, and a small inheritance, and so paid cash for the rest. By spreading the classes out, one per term (except for the summers, when I inexplicably doubled up in a concentrated amount of time; I do not recommend this), I earned my master’s degree without a penny of debt.

Then, I went back to school for my doctorate. I did not need to borrow money to cover living expenses, but I did borrow to cover tuition. Having never borrowed money for school before, I took it upon myself to go to the financial aid office in person to make sure that everything was squared away.

I had already filled out the FAFSA forms. I had taken the FAFSA quiz that has questions along the lines of, “you know you have to pay this back, right?” The government offered me the full amount of unsubsidized loans: $12,500/year.

The catch was that I didn’t need $12,500 a year. Tuition was in the neighborhood of $4-6,000 per year, because 1) it was an affordable state school, and 2) I was only attending part-time.

I couldn’t figure out how to decline any part of the excess money, so I walked into the financial aid office of my school and introduced myself. I said I was new to that school, and to the student loan process. I asked if someone could please tell me how to borrow the money that I do need, and decline the money that I don’t.

Seems straightforward, right?

The lady behind the desk handed me a form and said to fill it out. There was a box at the bottom for me to handwrite my explanation as to what money I wanted to decline. This seemed rather unofficial to me, but after all, these are the people who should know, right?

I filled out the form. I again explained my intention. I was told that I had done what I needed to do, and to have a nice day.

Huh, I thought. That was easy enough.

About a month later, I received a statement from the U.S. Department of Education. The statement showed that I had borrowed the full amount offered, and that interest was accruing.

I went back to the financial aid office. I again explained my situation. I was again told that I had followed the procedure to only borrow X dollars and decline the rest.

“Except, the Federal Government is charging me interest,” I explained. The financial aid staff was confused. I had followed the procedure and they had logged my visit in the computer. If it said in the computer that I had done what I was supposed to do, then we were all set.

“Except, the Federal Government is charging me interest,” I said again.

I refused to leave the office until we got this figured out. It was an uncomfortable situation. The financial aid staff kept insisting my account was set up properly. I kept showing them the loan statement showing that it wasn’t.

Eventually, defeated, I left the office, confused, but unable to get anywhere.

Then, I received an email saying that if I did not settle my account within three business days, I would be dropped from my schedule.

Excuse me? What’s this now? Had I not followed the procedure? Did I not go, in person, twice, to speak to financial aid professionals to ensure that my account was set up properly?

Did I not fill out the form that I was told twice was all I needed to do? Did the financial aid staff not check the computer and see that my account was set up properly? And as the Federal Government was charging me interest, clearly something was paid to someone. If I didn’t have the money, and the University didn’t have the money, who had the money?  What on earth was going on?

I went back to the financial aid office. Again, I had to insist that my account was not, in fact, set up properly, only now I had the added component of the threat of being dropped from my classes, and I had no idea why.

I insisted on sitting down with a supervisor in the financial aid office. She checked the computer. She said what everyone else kept saying: my account showed that I had set everything up and so clearly had not borrowed the extra money. I showed her the loan statement from the federal government showing that the government had loaned me the full amount.

I showed her the email saying I was about to be dropped from my classes and now had only had two business days to work out what I had thought I had worked out weeks ago by going, in person, twice, to the financial aid office, explaining my situation, and asking for help.

Here’s where I fast forward to the conclusion: It turns out that when the Federal Government issues student loan checks, it sends the checks to the school. Then, students apparently, as if by magic or telepathy, have to know to show up at the Bursar’s office at a particular time of year to claim the check.

To this day, I have no idea how students learn they have to do this. I never got a letter or an email or a phone call. I went to the financial aid office in person more than once, each time explaining that I had no idea how the process works and asking for help.

Yet, somehow I was magically supposed to know I had to stand in a line at a particular office at a particular time, accept a live check and either sign for it and keep the money or sign it back over to the university, at which time they credit my account with enough of the funds to settle my bill, and return the rest to Uncle Sam.

This process left me speechless. No wonder so many so students rack up debt like someone is handing them free money. Because, someone is handing them free money.

It’s a good thing I was a woman of a certain age, who was raised to be extremely conservative with debt. There was no way I was going to borrow one penny more than I absolutely needed to cover my tuition. But would the situation have been different were I an 18-year-old freshman who didn’t grow up with my dad teaching me the importance of saving early and often?

I was acutely aware of the impact of debt and compounding interest, but I know that not everyone is. I can see the dollar signs adding up as one uninformed college student after another is handed a five-figure check with their name on it, knowing they don’t have to figure out how to pay it back for years.

To this day, I do not understand how students are supposed to figure out this process. Apparently, they do. That line at the bursar’s office was long. Does every student figure this out the same way that I did, through confusion and mild panic?

There were a lot of people involved in the financial aid office (and, not incidentally, the Dean’s office, when I called to ask why I was about to be dropped from my classes) who treated me as though I was doing something wrong. The woman in the Dean’s office was flat-out rude, acting as though my situation was entirely of my own delinquency for not paying my bills. Even when I explained the situation, still she was condescending and rude, as if I was lying about my circumstances.

If walking into the financial aid office and asking point blank for help understanding the process is not enough for a student to become educated, what exactly are students supposed to do? Circumstances like these make me angry at the growing student debt crisis in our country, because it’s clear that there is information that needs to be shared, yet the people in the best positions to share it are not doing so.

 

 

 

 

How I Got Through College Without Crippling Student Loan Debt, aka Thanks, Mom and Dad

This morning, I read yet another “how I wound up with a bajillion dollars worth of student loan debt” article. And I experienced my usual reaction: it’s not as if the cost of tuition or the cost of interest on the loans were a surprise. No one did that to you. You made a choice. If you don’t want to end up with crippling debt, don’t borrow the money.

Then, I thought back to my own college experiences, and about the choices that I made that allowed me to graduate debt-free. And I realized that it’s an easy thing to point debt-free fingers now, but important to remember that when you’re 18, 19, 20 years old, there’s no magic place from which to get the information you need to make smart financial choices. The learning curve for how borrow responsibly and manage debt can be steep.

After one year in college, I wanted very much to transfer from my affordable state university to a fancy private school in my dream city. My parents, who were generously paying the full bill for me to attend said state school, were not happy about this decision. They didn’t really understand it. Neither of them attended a residential college. My dad commuted to his school while living at home with his parents, and my mom didn’t go to college, instead working to save money while dad was in school. “That’s just what people did,” mom always said.

So, the idea of eschewing this incredible free (to me) thing – a full ride, including room and board, at a well-regarded university, in favor of a much more expensive degree at a school that they regarded as essentially the same only this one would require plane tickets to get me there and back and a much higher price tag – was unthinkably bizarre to them.

To me, the allure was living in the brand new city, spreading my wings, and experiencing life. The school had a unique work-study program that would have allowed me a structured way to get significant work experience under my belt by the time I graduated. It also involved moving away from home, which had a lot of appeal.

My parents only saw the price tag: Fancy Private School cost a whopping three times as much as Perfectly Fine State University. My parents were willing to continue paying the same money they had set aside for me to attend Perfectly Fine State University, but I would have to come up with the balance on my own.

I knew even then that coming up with that amount of money was not going to be easy.

I was disappointed. My dreams of living a grand life in Fabulous New City were crushed. Darn my parents and their practicality!

I stayed at Perfectly Fine State University and learned to make the best of it. I made good friends. I found my own work-study opportunities.

I’ll be honest – it was a long time before I was able to let go of the big idea of attending Fancy Private School. I can look back on it now, twenty-plus years later, and see the benefit of my choice to stay at Perfectly Fine State University as I am able to move forward with my life enjoying the lack of crippling debt that an expensive undergraduate education would have cost me.

What stopped me from taking out loan after loan and [insert dramatic emphasis] going after my dream of attending Fancy Private School was not logic or understanding of personal finance. It was, quite simply, my parents.

It was seeing how stressed my mother was at wanting so badly to help me have the thing I clearly wanted but knowing she couldn’t afford to send me there. (And, to be fair, my parents gave me a pretty nice life. It’s just that the Thing That I Wanted was ridiculously expensive and unnecessary.)

It was sitting with my dad in the hotel room in Fancy New City when he took me there to visit the school (and probably hoped to show me that it really wasn’t all that different than my Perfectly Fine State University. To me, though, Fancy New Private School was all glitter and rainbows). After going on a tour of the campus, we went back to the hotel, and had a chat. That’s when he said that he and my mother were prepared to continue paying the same amount of money they had planned to pay to send me to Perfectly Fine State University, and that if I were serious about attending Fancy Private School, I was going to be responsible for coming up with the difference in cost.

“How are you going to do that?” my father asked. I had no idea. I had a vague awareness that other people took out loans. I thought I could do that, too! My dad explained a bit about how long it might take to pay off that amount of money. He talked about how difficult it might be for me to borrow the amount of money I needed, because he was not willing to co-sign a loan or sign the student loan paperwork that would require me (him) to divulge his salary and other assets to the federal government.

I was stumped. How do other people do this, I wondered?

I still don’t know for sure how people finance that kind of expensive anything without help. Through massive interest rates, most likely. Perhaps they do have a parent or other family member willing to co-sign a loan. I truly don’t know how people even get that kind of money to borrow, let alone figure out how to pay back, without any participation from their parents, as nascent young adults without an established credit history.

What I do know is that it was hard enough to figure out how to live on my entry-level paycheck for my first job out of college without loan payments to make. I don’t see how I could have gone to graduate school with that kind of debt under my belt, either. Or bought a house. Or saved for retirement.

Do I wonder, every now and then, what life would have been like had I been able to move to Fancy New City and attend Fancy Private School? Sure, I do. Am I grateful that I had parents willing to help me put the brakes on and make a more sensible decision that would affect me long-term? Absolutely. I realize that not everyone has that kind of support built in, and I try to keep that in mind when I read yet another article about someone who took on hundreds of thousands of dollars worth of college debt without realizing just how financially crippling that would be. Sometimes, people really don’t know the effects of a decision like that until it’s too late.

Complacency Will Cost You

A few years ago, I went to the Verizon store with my mom just after Christmas. After years of resisting technology, she had just spent several days in the house with me and my sisters as we all shared photos and texts among one another. Mom felt a bit left out, and decided she was ready for a smartphone. We were thrilled.

Once in the store, we helped mom pick out a phone that would best suit her needs. The salesman then described the data plan. He offered her the same data plan that I had, but for $20 less a month.

“Hey, wait a minute,” I said. “I have those same levels of talk, text, and data, only I’m paying X.” The salesman got my mom set up with her new phone and then took a look at my plan, and found a way to match her deal. By speaking up at the right time, I scored a plan that was $20 cheaper each month, for the same amounts of service.

Fast forward to this year. I went in to the Verizon store because I was having an issue with my phone and needed some help. The salesman was able to help me with my concern, and then asked if he could look up my plan. I thought for sure he was going to try to sell me some new expensive deal. Instead, he offered the opposite.

Plans had changed over the previous year, and he could offer me the same amounts of talk and text (unlimited, for both) with more than double the data, plus monthly carry-over data, for less money each month.

I had my skeptical face on as I asked for the catch.

“No catch,” he said. The plans had changed since I last checked in, and as long as I stayed on auto-pay billing, I could have the cheaper rate.

Granted, I don’t have the latest model phone, but I bought it new (and for cheap, since it’s an older model) just a few months ago so it should last a good while. And I now have an even less expensive cell phone bill than when I matched my mom’s rate.

Lesson learned. Every year I’ll check in with my cell phone carrier to inquire about current plans and see if I’m eligible for any changes. I may not always be eligible for a discount, and there is certainly no secret or rocket science involved here, other than the importance of being vigilant and the willingness to have a conversation and ask about my options.

Finance Series: Step 1 – Open an IRA

So, you’re well into adulthood and have saved nothing for retirement? Don’t worry; you are not alone. According to the Economic Policy Institute, more than half of Americans have saved $0 for retirement. According to Time magazine, the number is more like 1 in 3 Americans who have saved nothing. Either way, that sounds awfully bleak, doesn’t it?

Do not despair. Believe it or not, there is still time to get started on saving for retirement, regardless of your current age. Can I tell you exactly how much you need in what types of accounts so you can retire at X age? No. That’s what financial planners are for. But I can tell you about my first steps towards saving for retirement and how they helped propel me forward.

The one main and true key to any investment strategy is to internalize this one fact:

The key is to save early and save often.

I know. I just acknowledged that you are no spring chicken. So how, you may be wondering, does this “save early” thing work for you?

Easy. The key isn’t to jump into your TARDIS and start saving from childhood (though that would be great. Also, who wouldn’t want a TARDIS?). The key is to realize that today, right now, you are in the best possible standing when it comes to saving for retirement, more so than any other time yet to come in your life. And if you don’t start saving today, that’s okay, because tomorrow is the next best possible time to start saving for retirement.

See what I did there?

The point is to embrace and accept that the amount of money that you save and where you put it are just the details. The important thing is that you begin. Today, if possible. Even if a little. Because you and I both know you can spare $5 a week. Or $20 a month. Or $5 a month if that’s where you are in life. That’s okay! The amount doesn’t matter. What matters is that you open the account and set it up to automatically have money go into it.

Now, where should you put your precious dollars? I’m so glad you asked.

Get thee to your nearest bank or credit union and open an IRA.

Yep, it’s that simple. No research needed. Sure, there are lots of details to be learned later about different IRAs and investments and yada yada. Do not worry about that today. Money can be moved all around, there are all sorts of options, you are not tying your hands by doing this. Instead, you are doing two things:

  • Creating a habit
  • Putting your money somewhere safer than the stock market but not as low-interest as a traditional savings account – perfect for developing that habit and saving something meaningful without losing your shirt.

Big bank, little bank, credit union – doesn’t matter. Wherever you currently have a savings or checking account has IRAs that it offers to members.

IRA stands for Individual Retirement Account and it’s a type of savings account for money you don’t plan to need for a long, long time. It generally has a higher interest rate than a regular savings account, and has some rules where you can’t easily withdraw your money. That’s a good thing, because it forces you not to spend your money until much later.

There are two kinds of IRA: Traditional and Roth. At this stage of your savings game, it really doesn’t matter which you pick. I started with a traditional because when I started investing, Roths didn’t exist. Yeah, I’m old. These days I have both a traditional and a Roth IRA, plus some other things. It’s good to diversify and have money in different places. But when you are just starting to save for retirement, don’t worry about that. Baby steps, friend. Baby steps.

The difference between the two has to do with whether you pay taxes on the money now or later. That’s really up to you, but you wouldn’t be reading this post if you already knew everything about IRAs. I’ve included a few links below to some good sources for more information, if you’d like to read up, but in all honesty, it doesn’t matter which you pick. The key to is to get started building your new investment habit, and both Traditional and Roth IRAs are a great way to do that.

So, your homework: Go to your financial institution. Tell them you want to open an IRA. Tell them you want to set up automatic deposits into the IRA in the amount of $X every $X (how about $10 per paycheck to start?).

They’ll have you fill out some forms. You’ll sign a bunch of things. Be prepared to show your driver’s license, and name a beneficiary for the account. Then, every month, watch your statement and see your account balance grow. You won’t even miss the money you’re putting in there, I promise. You’ll thank me for this when you’re old. And in coming blog posts, I’ll go into more detail about other things you can do with IRAs and other ways you can invest and earn a bigger return, but one thing at a time, grasshopper. One thing at a time.

To do a bit more reading on Traditional vs Roth IRAs, here are some reputable sources:

https://investor.vanguard.com/ira/roth-vs-traditional-ira

https://www.nerdwallet.com/blog/investing/roth-or-traditional-ira-account/

https://www.fidelity.com/retirement-ira/ira-comparison

Additional sources for this article:

https://www.cnbc.com/2017/06/13/heres-how-many-americans-have-nothing-at-all-saved-for-retirement.html

http://time.com/money/4258451/retirement-savings-survey/

 

I Saved 25% on my Internet Service. You Can, Too.

I think often of the man I met at my former job, who told me about his efforts to simply be nice and ask for what he wanted and how that usually worked in his favor. I also know, from my experience in nonprofit fundraising, that the number one reason why people give money is because they were asked. And offering a discount isn’t that different than writing a check for a donation.

So, when my new resident promotional rate ended after a year, I knew it was worth asking for a discount. And, by simply calling my internet company and asking for what I wanted, I got it. Here’s how I did it:

I was strategic: Even though my internet provider has customer service representatives available 24/7, I made sure to call during regular business hours. I knew that the authority to offer a discount would likely need to be made at the manager level, and the manager was most likely available during the business day. I also chose to call at the end of the business day, knowing that customer service reps generally have angry people calling at all hours, so I knew if I was the nice voice at the end of a long day, it might make an impact.

I was patient. I called the 800 number on my bill, knowing it would likely take many steps and probably several minutes, minimum, before I spoke with a live person. The automated system that “answered” the phone tried to get me to say what I wanted so it could route the call appropriately, but I have a strong aversion to talking with robots. I simply kept saying “I want to speak with a person,” each time I was prompted to speak until I was connected with a live human. It took maybe half a dozen tries.

I was polite. When the woman who answered the phone asked how I was doing today, but she was working from a script. I wasn’t, however, and my kindness was sincere. I said that I was just fine, thank you very much, how are you? And when I asked that question, I meant it. I think my friendliness surprised her, and set the tone for the rest of the interaction. Would she still have been willing to escalate my request had I been rude? I do not know, but I have a hunch, given my experience working in customer service, that my politeness made an impact.

I was direct: After we exchanged pleasantries, I simply told her why I was calling: “My one-year new resident introductory rate for internet service has expired so now I am being billed at the higher rate. I’m calling to see if there are any promotions or other ways I can reduce my monthly bill without reducing my level of service.”

That’s right – I told her I wanted the exact same product, but for less money. I made sure to say it nicely. I knew that she was likely not someone who could authorize such a thing, but that someone there could. I was right.

I was prepared to repeat my request. The nice customer service lady asked if I would mind if she transferred me to the Customer Solutions department. I said not a problem, that that would be terrific. She placed me on hold for a few minutes, and then a new person was on the line. I repeated my request to him, again just as nice as I could be.

I used all available information. I had recently received a promotional letter in the mail offering service with this company at a steep discount than what I was currently paying. I did see the fine print saying this promotion was for new customers only, but I knew that if they offered this deal, perhaps there might be other deals for which I did qualify.

My new customer service rep asked me a few questions to clarify what I type of service I wanted (nope, I’m not interested in adding cable or a landline to my service, thanks). He confirmed that the that promotion I received in the mail is for new customers only and involves internet access at lesser speeds than what I currently use, but that he would be happy to see what else may be available.

I continued being patient. He then placed me on hold for a few more minutes. I took the time to pace around the room and get in some more steps for the day. When he came back, he said he found a much cheaper plan, though it was for slower speeds. However, he could include an upgrade to my current speed for an additional charge, making the total price, with fees, about 25% less than my current bill. I said that sounded perfect.

The breakdown:

  • Total time spent on phone: 22 minutes
  • Customer service representatives: 2 (3 if you count the robot)
  • Times placed on hold: 3
  • Original monthly bill, with fees: $97.95
  • New monthly bill, with fees: $72.99
  • Monthly savings: 25%
  • Product received: Exactly the same

This rate is good for one year, after which my rate will go back up again. The customer service representative did say it’s a good idea to call each year to see what promotions or packages might be available. I intend to do just that. It’s more than worth 22 minutes of my time once a year to save $299.52 in monthly expenses!