Beryl Jantzi is director of Stewardship Education 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. This post originally ran on the Menno Snapshots blog of Mennonite Church USA.
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. Following, I will highlight three stages related to the topic of affording college. 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. Below I’ll list three stages and the proactive steps you can be taking throughout this journey.
If you find this list helpful, I would invite you to follow the link provided at the end and watch the three short videos that go into greater detail on each stage.
Before: The prospective student
- Know what financing is available
- Educate yourself on federal loans, private loans, subsidized and unsubsidized loans.
- Shop and Compare
- In-state versus out-of-state costs, community college versus state university versus private school costs.
- Budget now
- Get information on tuition and living expenses for various schools. On campus and of 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, business scholarships available through parents employers, 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)
During: The current student
- 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 necessary.
- 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
After: Entering the work 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 are 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, watch these videos based on the lives of three students, Carol, Erica and Justin. Each of these students will speak in more detail to the realities of each stage of your college experience.