MoneySmarts U: Cherie’s Situation

MoneySmarts U: Cherie’s stressed

Cherie is an independent student paying for her own school through a scholarship/loan combo. She’s doing the best she can, but she’s still stressed. Find out how we help her.

Podcast transcript

JASMIN: MoneySmarts U is brought to you by IU MoneySmarts.

PHIL: Arguably, the most important years of your financial life are your college years. The decisions you make in college can make or break your first few years in the workforce. This is exactly why you need to be money smart. Enter MoneySmarts, Indiana University’s financial literacy program for students. To begin, it’s free! Now that makes financial sense. At moneysmarts.iu.edu, you can learn how to budget, how to deal with your credit, living expenses, and student loans. You can learn how to leverage summer earnings to help you reduce your student loans. Indiana University MoneySmarts, creating a financially smart culture one student at a time. Visit us online at moneysmarts.iu.edu to learn great ways to maximize your money and wreck your debt.

ALEX: Welcome back to the MoneySmarts U podcast, week two of the newest season, where we bring on a different student every week, to discuss their financial life. This week, we have an interesting one, Pete. It’s Cherie, who is from Kansas, but goes to school in New York, and is trying to deal with student loans and a bunch of other expenses with work-study. She’s got a lot going on. She does have a lot going on.

PETE: She does have a lot going on. I think sometimes you and I step back after recording these podcast interviews and we say, all right, objectively, how good a job has this person done? And on a scale of 1 to 10, Cherie gets a-

ALEX: A 10.

PETE: Yeah.

ALEX: I mean she is unbelievable. Yeah, she is doing everything right. She’s planning in advance. And you can tell it’s tough and it brings up a lot of different mindsets that students can have, because she’s doing everything right, but she’s still very stressed out about her situation.

PETE: Yeah, the easy choice is not always going to be the best choice, right? And the hard choice, often is the right choice. And so, she’s in a situation which she’s in chemical engineering, her degree’s gonna be that.

ALEX: You can tell she’s smart, she knows what she’s doing.

PETE: She’s much smarter than you and I.

ALEX: By far.

PETE: Incredibly obvious when you hear the conversation. Yeah. So, her income is totally gonna support-

ALEX: Yeah.

PETE: Her. And the student loan she has, as you’ll hear Alex, she’s gonna have a lot less in student loans, than the average student.

ALEX: A lot less than we honestly expected, in the beginning of the conversation. The way it was framed, I thought it was gonna be some crazy amount, and then you’ll hear the number and be like kind of just like okay.

PETE: Yeah, and she does so many things right, that so many students just overlook. She lives on campus, you know?

ALEX: Mm-hm.

PETE: She spends-

ALEX: Very little.

PETE: An absurdly low amount on food. She works. She takes a ton of classes. She’s living like a college student, and not like a young adult that happens to take college classes.

ALEX: Yeah, she’s getting scholarships and financial aid, and she takes it very seriously, does all the research she needs to, beforehand. So while we can understand the frustration, it’s part of her situation just feeling like it’s not going right, when you are doing the right thing. That’s something that sometimes maybe you need to get used to and hopefully she realizes from our conversation that, that’s the way it is in this situation.

PETE: Mm-hm. There’s no way I took my college career that seriously, as she takes hers.

ALEX: Yeah, not a chance.

PETE: And I knew you during your college career. You took yours relatively seriously.

ALEX: But she still puts me in the dust.

PETE: Yeah. She smokes you.

[LAUGH]

PETE: So I guess as people are listening to this, here’s the take away. You probably don’t take your education and your career path, as seriously as Cherie does, maybe you do. If you do, that’s great. But you’re somewhere on the spectrum. Right?

ALEX: Yeah. So maybe this would be a nice little kick in the pants for all of us, to get our stuff together.

[LAUGH]

PETE: All right. So Alex without any further ado, here’s Cherie.

CHERIE: Hi, it’s good to be here.

PETE: Well thank you. It’s good to have you. So, your situation is, you go to school in New York, but you’re an out of state student, because you’re from Kansas. Help us understand the challenges that that presents to you.

CHERIE: Being away from home and paying the out-of-state tuition, it definitely doubles the price.

PETE: And so, the idea that you decided to be an out of state student, I’m sure that was a tough decision to say, you know I’m going to pay a lot more for a college education. Was this all based on the fact that you wanted to go to the school that you go to in New York?

CHERIE: Yes it is, but it was also because that if I don’t change the environment and leave my comfort zone, bring out the challenge for myself, I believe that I won’t have grown as much as I am right now.

ALEX: Okay, so it definitely is a deeper question than just out-of-state schooling, in general. What would you say is the biggest thing on your mind, that you’re struggling with right now, kind of, on a day-to-day, financially?

CHERIE: It would be the student loans. I’ve been taking student loans since the very first semester I got here, so that pressure’s not going any lighter, as I continue my studies.

PETE: Now you have a unique situation, because you’re under a legal guardianship, which then classifies you as, an independent, meaning that the entire cost of the college education is on your shoulders. You’re graduating, it looks like, in 2017. So, are we to understand then, that every dime for college comes from student aid for you? Or are you able to defer any of the costs through employment, as well?

CHERIE: I do have a part-time job, but it’s from the work-study funds that our federal government offers. So, that’s part of student aid, as well. My financial awards don’t cover the total charge of out of state tuition, so I’m currently using some of my savings, that I’ve saved up the previous year, to make up for gaps right now.

PETE: And so, what do you think your total student loan balance is going to be upon graduation, Cherie?

CHERIE: Should be about, I would say, $10,000 to $12,000.

PETE: So, you’ll just owe $10,000 to $12,000, upon graduation, in student aid?

CHERIE: Yeah.

PETE: So are the rest of the aid you receive, they’re not clearly loans, they must be scholarships

CHERIE: Yes, they are grants and scholarships.

ALEX: Okay, very cool. Is that a process that you’ve gone though and are gonna have to keep doing and trying to get more of? Or is it pretty well set for the other years you’ll be in school?

CHERIE: No, it’s something that I have to continue to apply for every year, it’s a tight fit. I have to make sure, now it’s down to every penny that I have.

PETE: Now, your area of study is certainly unique. Tell us about that and how that impacts your decisions, as a student.

CHERIE: I’m studying, I’m currently studying chemical engineering and minoring in economics. The knowledge that I learn within mathematics, does help me about financing, but it’s not a big part of my studies. My studies kind of act as a motivation to keep me going, doing these finances at the beginning of each semester. Even though it’s stressful, but I enjoy what I do.

PETE: Have you had a chance to thoroughly think through what you’re gonna do with your degree, and the sort of job you can get from it? And what the economics of that job look like? Is that part of your decision making process?

CHERIE: You mean the minor in economics?

PETE: No, so with your chemical engineering degree, do you understand or have you thought through what sort of job that will get you? Because, obviously, you know, some of your friends and some students, they get a degree and don’t know what they’re gonna do with it. Do you have an idea of what you’re gonna do with that degree?

CHERIE: I kind of have a sketch of it. I know that I want to be in R&D, in a private industry, for certain chemicals that I love. I’ve been to Praxair, which is one of the companies in Buffalo area to do an internship there. So I kinda know what they do now, when they’re working their daily job. So I do have a rough sketch of it, and I think that’s what I wanna do.

ALEX: Yeah. So is your fear from, you know with your student loans, you said that’s the thing that is worrying you the most. Is your stress and your fear coming from having those student loans after you graduate? Or is it more of having the spending money to get by during the school year, on a day-to-day basis? Which of those is the bigger fear for you?

CHERIE: I believe the bigger fear is, right now, trying to get through each semester. Because I believe after I graduate I’ll be able to receive a job that can pay off the loans pretty quickly.

ALEX: Okay, and for your day-to-day expenses, like rent and books and food and things like that, are you using the student loans to cover those expenses? Or are some of your scholarships available to cover those? How are you paying for them?

CHERIE: I do not have enough financial aid to even cover my tuition. So my books and supplies, also room and dorms, are coming out of my own saving funds.

PETE: Tell us about that a little bit, if you can. I believe you are 20 years old, not a lot of 20-year-olds have savings and assets to be able to pull from. How are you able to accumulate savings at age 20?

CHERIE: It started when I was really young, my mom is a marketing professor. She has a lot of knowledge on financing, and she educated me when I was very young, but if I want to leave my home country and do something that nobody else does, I really need to be prepared and saving was one of the things that she taught me.

PETE: So am I to gather from this that your home country is not the United States? Or are you saying you still want to go over somewhere and study abroad?

CHERIE: My home country is not United States. I was born in United States. I am a U.S. citizen, but my whole family moved to Taiwan when I was two years old. And now I’ve came back for the college education.

PETE: Excellent. Okay, that makes a tremendous amount of sense. So if we frame this up a bit, you’re graduating in May of 2017, is that how you have it figured?

CHERIE: Yes, I hope that I will graduate in 2017.

PETE: So really, from what you told Alex, it feels as though we’re trying to manage the financial stress and rigors that comes with day-to-day life for the next year and a half, and try to make sure you’re not pulling too much out of your savings. Does that sorta distill down what you’re trying to accomplish?

CHERIE: Yes, that does.

PETE: Do you use a budget on a monthly basis or any loose idea of a budget?

CHERIE: Yes I do. Every month I try not to spend over $100 on my food. And everything else, the rent, are covered within the tuition, because I’m living on campus. So my daily expense, I mean, my monthly expense is about, I would hope for $100 less.

PETE: And your work study, the income you get from that, does that usually go to defray the cost of just living on a monthly basis?

CHERIE: Yes, it is.

ALEX: Okay, are you at a point with the savings, that you’re spending on a monthly basis towards your food and all that, are you at a point where you’re, legitimately worried that, that number is actually going to run out, before you graduate? Or is that a number that refills when you may be working over the summer?

CHERIE: This summer I did work and it did refill, but I’m worried that next semester it will be a little tough.

PETE: So as it stands now, now that we fully, I think, understand your situation, what is the current strategy for when that time comes? Is it to pick up hours, is it to work more over the summer to pre-fund what some of those financial struggles will be, what’s the current strategy to bridge the gap?

CHERIE: I’ll believe I’ll have to take out private loans, or find other alternative options on loans? Also, I will be picking up jobs in the summer, that’s off course.

PETE: Yeah and so, what I recommend, I think Alex and I are going to recommend on this, is that you clearly don’t need to take out loans now, but it may be interesting to start researching where you can do that, whether it be at a bank or a credit union. Credit unions do a lot of private student loans. And start to do the research now so you know what you’re up against, because what we don’t like to see people do, is wait until you need the loans to start the process because then, the delays throw you off big time. So definitely start the research now if you haven’t already.

CHERIE: I have started my research. These are the things that I need to be on top of, because I’m away from home on my own. So all my financial situations are handled by myself, with months of research beforehand. So I know my financial aid, or my financial situation, by heart. Currently, I’m looking into Discover Student Loans and Sallie Mae Student Loans. Those are the options that our school offers for students.

ALEX: Okay and it’s definitely good that you’re, at least, thinking about it ahead of time, which is half the battle in a lot of senses. What have you found so far in your research, what are you seeing in terms of the best situation, as far as, interest you’d be paying afterwards or how much they would let you take out? What have you found so far?

CHERIE: So far, that they would let me take out as much loans, up to the cost of attendance of UB or within my major. So, basically, it would give me two times more loans, that I will usually get in a normal semester. So it would not only cover my tuition, but also my monthly expense. I’ll have an almost $200 monthly budget, if I take out the loans. The problem is that, I will have to pay the interest every year, out of my job. I can’t wait the interest until after I graduate to pay.

ALEX: Right. Yeah, because it’s private, they make you pay. But before you graduate, you don’t get to defer that until the end.

CHERIE: Yes.

ALEX: During the school year, would you say you’re pretty maxed out, as far as, working during the week? You said you have a part-time job for work-study along side schooling, would you say you’re pretty maxed out, as far as, the amount of work you could do per week there?

CHERIE: Yes, I am pretty maxed out. I’m taking 19 credit hours of courses in engineering, on top of that, I have 12 hours of work study every week.

ALEX: Yeah, I’d say you’re pretty maxed out, definitely. That is no joke with that course load.

PETE: Well we certainly appreciate you sharing your story with us. Here’s what I think, kind of having seen these a few times. You’re gonna graduate with a very reasonable amount of student loan debt, well below the national average. And with the degree you’re seeking, as you know, the jobs in that field of study certainly can sustain and help you pay down those student loans. If not within a year, within two or three years. So the good news is, the student loans will not burden you deep into your 30s, which some folks have to deal with. So, good job to you, Cherie.

CHERIE: Thank you.

ALEX: So there you have it folks. Hopefully this episode, for you, is a bit of a kick in the pants. From hearing Cherie’s situation, I think a lot of us who, I just graduated college, you may still be in college, realizing you could put a lot of work in making your situation better, getting scholarships, working during school, heavy course load the she was even taking. There is a lot of things you can do, to make small improvements that will have a big impact later in life. And I think that is something to take away from this episode for all of you. If you want to be on the next episode of MoneySmarts U and wanna have us help you fix your financial life, go ahead and head to moneysmarts.iu.edu and fill out the podcast application. We’d love to speak with you to talk through your situation and who knows, maybe we’ll talk about sandwiches again next week. That’s always a hot topic here. For Pete, this has been Alex, and thanks for listening to this week’s episode of MoneySmarts U.

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