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PETE: Welcome to MoneySmarts U. I’m Pete the Planter. My co-host, Alex Eaton, joins me now.
ALEX: Hello, we’re back.
PETE: So here’s the thing. We’ve been doing this for a couple of years now, but we changed the name and changed the format.
ALEX: Yeah. We’re new and fresh.
PETE: So MoneySmarts U, here’s how it works. We used to be called, how not to move back in with your parents, which by the way, Alex, that’s a good name.
ALEX: Thank you. I appreciate that.
PETE: You didn’t come up with it, but it’s still a pretty good name. MoneySmarts U is what we’re doing now, and we are talking to a student at a time and fixing Their financial life. So Alex, you are a recent graduate of IU. And so, that provides you with some experiences that can help you help me help people.
ALEX: Yeah, this has been a pretty crazy experience with this podcast actually. When we started a couple years ago, I was a student in the thick of it. And then now that I graduated, and I’m kinda on the other side dealing with a new set of issues, but I think this will be a great new format for us because we can talk to some specific college students and relate that to things people are going to be struggling with and get there in the thick of it view of what’s going on. So I’m excited for this, this will be good.
PETE: If you want to be on the podcast, MoneySmarts U go to moneysmarts.iu.edu, to apply to be on the program. We’ll fix your stuff, we don’t care what school you go to cuz you need answers and we’ll all learn together. Al, who’s our first victim?
ALEX: So today, we’re talking to Jenna.
PETE: All right.
ALEX: And we’ve got a couple of things we need to cover with Jenna. First is talking about different ways to use a student loan. She’s tried to apply for a student loan, she has a scholarship which is really interesting, a 21st Century Scholar program. But she’s thinking about alternate uses of that, because she does need to get a car. Her college costs are covered with the 21st Century Scholar, which is why we’re talking about that. And we’re also gonna talk about working during school. So 15 to 20 hours a week, working during school. How can she use that money? What’s the best way to manage her schedule? And then the use of summer money that she’s made in a summer job, versus a school year money and how to utilize that to the best situation. So she’s really good in some parts, in managing what she’s been dealing with, but she’s in a pretty tough situation when it comes to a car, and dealing with the current expenses as far as paying for school and dealing with that student loan. It will be an interesting one.
PETE: Yeah, I think our situation is really unique because she’s done everything right, the school is free. Cuz of this 21st Century Scholar thing, which you’ll hear about here in a second. But now she can’t even get to campus.
ALEX: Yeah. I feel bad in a sense, because she’s done the right things. But extraneous circumstances are kinda screwing her over in a sense to some point.
PETE: Yeah. So again, if you wanna be on the show, go to moneysmarts.iu.edu. But in the mean time, here’s Jenna.
JENNA: I’m having trouble. I’m going to be commuting to IUPUI this fall. And I recently wrecked my car. And I was going to use student loans to buy a reliable used car to get to and from school. But now I can’t and I still don’t have a car and I’m not sure what to do.
PETE: All right, you’re okay though, Alex we need to make sure she’s okay. So you’re fine but part of this too, your insurance had to have gone up, right?
JENNA: Yeah like for any type of car I want I think it’s around $170 to $200 a month.
ALEX: See that’s the cost of being under 25 years old and having a car accident, so that’s no fun. So at first you thought the solution to your issue may be to find a student loan, or take out student loans that would help you buy the car. Why did that end up not working for you?
JENNA: Well because whenever I texted the school to see if they would approve my loan, they said that my total cost of attendance was covered, which it was, because they don’t put in a car as a necessity, technically. And so the numbers that they had given me for my award letter was wrong. And that’s what I used. And then, I ended up finding out it was covered, and that makes me so happy. I’m glad that all of my college is covered, but I do still have this issue of getting a car.
ALEX: Yeah, and that’s always interesting to find out that you were going to take out a student loan to help out, but you can’t, which is a good thing, but it also puts you in a tough place. Do you know what you’ve been looking at for as far as what type of car to buy or where you’ve been looking at getting one?
JENNA: I would prefer to buy from someone selling their car personally, cuz I’ve dealt with used car lots and they’re not always reliable. And they like to tell you things about a car that aren’t true or sugar coat it. And I’ve been looking $3,000 and under price range. Just something to get me to and from school because I do only live about 20 minutes away.
PETE: Sure, so have you explored private student loans, or have you explored car loans? I know you didn’t want a car loan, because then that changes your cash flow from a monthly basis. Then you’d have a car payment of a couple hundred bucks, is that the issue?
JENNA: Yes, it is, and I’m paying for my insurance and I also pay my own phone bill. And I’m working a part-time job right now, I’m working about 16 to 20 hours a week, because I don’t want to work too much and not be able to keep up with school work. So, it’s like trying to balance working and school and being able to afford the necessities in my life right now.
PETE: So, are you going to be a freshman then?
PETE: And you were awarded scholarships to cover the entire cost of attending school. How did that all go down?
JENNA: I’m a 21st Century Scholar and I still, I signed a paper in eighth grade saying that I would keep my grades up, wouldn’t be in trouble throughout high school, and I haven’t even paid attention to it. And then senior year comes and there have been some paperwork. And I received the whole, they paid for everything this year. And if I keep my grades above a 2.5 during college, they’ll pay for my sophomore, junior, and senior year of college.
ALEX: That’s crazy.
PETE: That is a bit crazy.
ALEX: How do you become a part of that program in the first place? How does that come about?
JENNA: Well, whenever I was in eighth grade, they based it off your family’s income. And at that time, my mother wasn’t working, my father was the only one supporting our family. And so in eighth grade, I was eligible to sign up for it because my mom wasn’t working. So it’s really salary based off your parents and it does suck because some kids had more money than and they could afford to go to college when they were maybe in eighth grade, and now they don’t have the money. So it really depends on the salary that your parents make.
PETE: I’m looking at the 21st Century Scholars website here. It’s for the state of Indiana. You had to commit to not use illegal drugs, commit a crime, or delinquent act, or consume alcohol before reaching the legal drinking age. So no crimes? You don’t like to commit to no crimes. I’ve also committed to no crimes Alex. It’s just sort of a general principle I carry around. Have you committed to that, no crimes? I mean I gotta know this.
ALEX: No, no crimes so far, you would know.
PETE: So all the three of us, we’ve all committed to not commit crimes, yet Jenna, you’re the only person that school has paid for because you committed to not commit crimes.
JENNA: Yeah, and I know. I actually have a few friends that also got the same exact scholarship.
PETE: Man, that’s amazing. I truly had no idea about that.
ALEX: So if I commit to no crimes for like the next four years, you’ll think they’ll help me with my student loans? Would that be an option?
JENNA: I would call them up honestly. I mean, they seem pretty generous giving me $17,000.
PETE: Yeah. So I’ll commit to this, Alex. If you do not commit a crime in the next three years, I will buy you a sandwhich.
ALEX: Deal. [LAUGH] I’ll take what I can get.
PETE: Pretty solid deal. So do you work?
JENNA: Can I get a sandwich too?
PETE: You know what, if you’d like a sandwich, we will somehow get you a sandwich. We can make that happen. [LAUGH] So do you work during the summer then?
JENNA: Yeah, I’m actually working full time. I’m on my lunch break. Sure. I’m an intern in the marketing department.
PETE: All right. Yeah.
JENNA: And it’s what I’m gonna major in that school.
PETE: All right. That’s a good job. So I guess where I wanna go with this is next summer when you work, the money you are earning now, what is it going toward, once the school year start? You go to live off of it? You go to spend it down? What’s your plan?
JENNA: Yeah. Well I started working late this summer. And I do pay my own bills. And I feed myself most of the time. I don’t really live with my dad. I live with my grandparents.
JENNA: So and they’ve helped me out. But I mean most of the time, I’m on my own. So most of the time it just goes to me buy myself clothes and necessities that I need. I pay my own phone bill, and I am kind of I would say I’m a little destructive. Not just by nature. And so this summer I had to buy a brand new phone and it really goes to just me.
PETE: Sure now I understand.
JENNA: All of it.
PETE: So there’s a few options the way I see it with the car. You’re gonna have to borrow money in one way shape or form, right?
JENNA: Mm-hm, yeah.
ALEX: Do you have any money saved up to buy the car? Or is it totally blank slate right now for that?
JENNA: I have a $1,000 saved.
PETE: But some of that is gonna carry over to the school year or two, right?
JENNA: I’m getting $1,000 from financial aid from my grants and stuff, so that’s going, I had already purchased my meal plan and stuff like that. So the $1,000 I’m getting back is going toward my laptop and books.
PETE: Okay, so I mean, so far, other than the car every piece of money, if you will, you’re getting is going towards what it should go toward. Your meal plan, books, laptop.
PETE: So that’s good. The three places you can borrow money from potentially, and we should explore all three of them. You can potentially do a private student loan with a banking institution.
JENNA: That’s what I actually did. And it was denied by the school.
PETE: Really? That is fascinating.
JENNA: Included a private loan, and the school couldn’t approve it because my total cost of attendance was covered, like they said there is no need for it. They said I could reapply for the loan if I did a housing appeal form or something like that to show that I’m not living at home and that I need more money and I don’t need to do that cuz I am living at home.
PETE: Yeah, that’s true. It’s funny when you try to do the right thing within the system, sometimes the system doesn’t help you although it seems like it should. I think that’s probably what you’re up against.
ALEX: That’s brutal to me. And so the question I would have, and Pete, you could probably speak to this a little better, is would that put you better off in the terms of, is a car loan or a private student loan worse, in the sense of owing more money later, or the type of situation that would put you in?
JENNA: Yeah. I definitely thought about that, and I have already calculated out how much working, like if you’re in school, how much I’m gonna be making each time. And I haven’t really explored that many car loans and I know the interest rate is a lot lower than student loans. It’s just that I don’t wanna be broke, every single day-
JENNA: Going through school. Even though some kids do do that, I don’t have anyone to back me up and help me when I am out of money and I need something. So I just want to make sure I have my funds in order to be able to support myself and pay for all this stuff.
PETE: I think the issue for me with student loans versus the car loan, is that with student loans there’s a deferment period of which you don’t owe. And that’s the big issue. With car loan, it puts you in that cash flow crunch. Now you mentioned you don’t have anyone having your back financially, which I get. Have you gone to a bank and just asked for a personal loan which could be deferred? They’re rare, but they exist, go to your bank or credit union. Have you explored that?
JENNA: I have not. I haven’t, I probably should, it’s just the only thing is the time. I’m in a really big timing crunch. I start school next Monday, and we thought the loan was gonna go through and then we find out it didn’t. We found that out last week, like last Friday. And so this is a kind of really small time period, and I have to figure this out.
PETE: What about carpooling, or something like that? Is that look like what you’ll end up doing, getting a ride with someone else for right now?
JENNA: I had thought about that. But with my work situation, I’m working mornings. Most of my classes are around noon. And I’m working 7 to 11 here in the morning and then leaving from here and going to class.
JENNA: So it would be be a lot difficult to get a car pool.
PETE: It sounds like to me there are two practical options. Now one’s better than the other. I think either getting a very, very, very small car loan, I mean you could probably-
PETE: If you’re paying it over three years and it’s like a $3,000 or $4,000 car, your payments gonna be close to nothing. So-
JENNA: Yeah I know.
PETE: That’s probably the most practical option. The second option is to work more hours. Which we don’t necessarily want to recommend that, cuz then that starts to affect your performance in school.
JENNA: Yeah, yeah, I think I might try to do the car loan, I’ll probably go see about that sometime this week. I do get a few days off, so they’ll let me prepare for college, but will do.
PETE: Are there any other questions that we can help with. We weren’t able to answer this 100% because there’s some variables, but I think the car loan is the best bet because it’ll be pretty expensive
JENNA: Yeah, I also agree. But, you know, that’s actually my only question about college. I think I’ve got everything else figured out, surprisingly.
ALEX: Yeah, and then the only other thing I would say on the terms of the car is to have some breadth in what you look at. I’m looking to buy a car in like September-ish when I’ll have to, and looking everywhere from used car websites to even people on Craigslist. You have to be very careful in terms of being able to trust people, of course. With that kind of regard, but I would maybe do some research into knowing what you’re looking for. What type of car is more reliable than another in terms of brand and that kind or thing. Cuz that can really help save money in the long run.
JENNA: Yeah, that’s definitely I’m looking more towards gas saver. Something that will just run for four years and get me from point A to point B.
PETE: I was gonna say if you can continue to commit to being crime free over the next four years, we will get a sandwich in your hand. Some way or another.
JENNA: Awesome. Sounds good. Thank you so much.
ALEX: If you’re interested in sandwiches or fixing your financial life, feel free to reach out to us if you want to be on the show. Moneysmarts.iu.edu is where you can fill out the application to be on the show. We would love to have you. We’d love to fix your financial life and discuss sandwiches in depth with you. Thank you for coming out for the first episode in the new season. For Pete the Planter, my name is Alex Eaton and this has been MoneySmarts U. You know, like U for University, for the school. But it is still about you. Y-O-U, I don’t know. Well see you next time.