Podcast: Obermeyer Wood's Dollars and Sense - Episode Six

Obermeyer Wood’s Dollars and Sense Podcast - Episode Six

In this episode, we talk about the different options we have when it comes to financing a college degree and take note of the ways our lifestyle in college might affect our future.

Effie:

Testing testing. Okay. Perfect. Ladies and gentlemen, distinguish alumni professors and administrators, friends, and family. It is truly an honor to stand in front of you today. As one of the proud graduates of this year, this fine establishment has enriched us with the finest education. $150,000 of student debt can buy. Ironically, despite the plethora of advisors we were provided on this great campus, none of them emphasized the importance of a budget or warn us about the dangers of high interest credit cards with that guidance. I'm sure I would've read the fine print twice before signing up for the big bank's credit card at their little booth during freshman year welcome festival. My inability to resist the free school mascots stuffed animal and the complimentary pair of sunglasses has unfortunately resulted in $10,000 of credit card debt. Oh, I'm sure the many Uber rides, the furthest ski resort every weekend didn't help either. They didn't really tell us about the difference between loan providers and how important interest is when it came to student loans. I ended up taking out private loans to fund my entire education here at this wonderful establishment. But since there were mostly unsubsidized, that accrued interest when I was in school, my 150,000 is apparently already 160,000. Anyways, I'll spare the details on exact interest rate in the interest of time.

Effie:

So while the school has taught me so much and provided me so many wonderful memories, if I could go back and give myself one piece of advice, it would be this. Please learn about personal finance and probably start carpooling because those Uber search prices were insane. Ouch, can you imagine somebody saying that at their graduation speech, but I wonder how many would've, if they were being honest, how can we make sure that that's not us? What can we do to be better prepared for college? Meer would investment council presents dollars and cents a podcast where we talk about our dollars in a way that makes sense, your final bell of high school exciting. Isn't it. Now you can finally look forward to your new life as a college student. So where do you even start preparing? I won't be much of help finding which curtains would match your dorm aesthetic, but we can certainly discuss the cost of college. But here's a quick tip that you might need to know. You don't have to raise your hand to go to the bathroom. You can just go.

Effie:

Okay. Okay. Some of us didn't have older siblings to tell us that. So you're welcome. Alright, Alright, now let's talk about the cost of college. The sticker price of college can feel daunting, especially when you think of the cost of tuition along with living fees, AKA room and board. So where do you even start? Well, first, think about talking with your family about what resources may already be available to you.

Ali:

Well, first is just having, um, an open dialogue in your family.

Effie:

Did your family set up an account to further your education

Ali:

Are the parents can help pay for the school? Have they set money aside in 5 29, plans,

Effie:

5 29 plans and education savings accounts are two types of tax advantaged accounts that allows families to save up for their child's college education.

Ali:

Some families, um, the parents wanna help pay for the college or the grandparents and others really want the kids to have skin the game by taking out a loan. And that's just the key thing. Again, there's no right or wrong, but just making sure you understand what your, how your family's viewing college to make sure that you're prepared and not caught flatfooted as you're looking at different schools,

Effie:

Having these conversations early on can really help in the long run

Ali:

Because every family's very different on their circumstances, but if they at least kid knows in terms of these are be my, um, obligations during school, they'll have to they'll figure out in terms of whether they're gonna need a part-time job or not to be able to service a loan for instance.

Effie:

So after you've taken to account the resources you already have, what are some other options for paying for school? You may already be familiar with scholarships as another option. However, do you know that there's so many types of scholarships out there? I'm sure you're familiar with academic scholarships as well as athletic scholarships, but did you know that there's literally a scholarship for almost every hobby, extracurricular activity interest identity, and the list goes on and on. There's a scholarship for making duct tape prom dresses. If you love cats, there's a scholarship for that as well. And there's even a scholarship available for you if you grew up Amish, but I'm not sure how applicable that is. If you're listening to this podcast, what I'm trying to say is that you should do as much research as possible to see which scholarships you'd be eligible for. It will take some time and effort, but you never know what you'll find a lot of organizations and companies give out scholarships. However, oftentimes scholarships given out by schools are a lot less competitive because there's less people applying to them compared to national scholarships. So overall you wanna see what you have available to you in terms of savings and scholarships and grants before you move on to seeing your loan options.

Ali:

Um, but I think when it particularly comes to college is first, you know, speaking with your parents or guardian or other family members, hasn't been money set aside, you know, it maybe get their help in terms of figuring out whether there's scholarships or grants available. And if not, then in terms of what sort of loans are out there and working with them to find out the most attractive loan option,

Effie:

If you're interested in taking out a loan, there's two types that you need to be aware of. If

Ali:

You do need to take a loan, um, there's ones that are supported by the government. There's also ones that are available by private companies.

Effie:

There are federal student loans, which are government loans, and then there are private loans under federal student loans. There are subsidized loans and unsubsidized loans. Huh? Okay. Okay. Let's break that down. So a subsidized loan is a type of federal student loan in which the government is paying interest for you. When you're in school, you start the repayment process for the loan after you graduate. And you're often given a six month grace period for this as well. Woohoo. And that's exactly when the interest starts accruing that you have to pay for unsubsidized loans. The interest that you pay starts accruing immediately, even while you're in school. Those are the two types of government, student loan options available. However, there are other options as well, such as private loans, private student loans are often lent out by banks or credit unions deciding on which loan option that would work best for you can be a bit difficult. So here's a list of questions that you can use that will help you decipher which one would work best for you. What is the interest rate?

Ali:

Just find one that's gonna have as low interest rate possible, cuz that means you're gonna pay as low interest on it and allow you to be able to do it over time.

Effie:

What is a payment schedule and do they offer a grace period?

Ali:

The key thing also is the payment schedule. Um, do they expect you to pay it back you right when you graduate or over a few years and trying to find something that's a longer payment schedule, lower interest rate and more flexibility. So if you can prepay it early, that'll just make sure that you don't, um, get too underwater with student loans.

Effie:

And lastly, does the loan offer deferment or forbearance, meaning are you able to postpone those payments in case there's a time where you can't afford them being very thorough on your research, on how to pay for tuition and room and board now can help you save a lot of money in the future. So once you have a plan to cover tuition and room and board, now let's think about your daily expenses.

Ali:

What does it cost to live? What does it cost for in terms of, if you have to pay for any sort of room, maybe it's including your college. Maybe it's not, um, food going out for entertainment, getting your haircut, all that basic stuff is stuff you need to be able to forward each month and make sure to have enough money in your bank account to do that.

Effie:

This is the perfect time to learn how to budget and lucky for you. We already have an episode on budgeting. So make sure to check that out for more in depth info. And

Ali:

This is the first time you're probably living more independently or, or responsible for your own finances. So from that point of view, the key thing is just not getting in trouble. not overspending.

Effie:

One thing that gets a lot of college students in trouble is credit card debt. They take out too many credit cards or max them out and then don't pay them back in the way that they should. We already talked about the dangers of that in the credit cards and credit score episode, but we wanna mention it again because of how prevalent it is amongst college students,

Ali:

Life is gonna get more complicated. So if you have those very good skills in the beginning of understanding a budget living within your means, which is the key thing possible, then you'll just be able to take that and be able to move on.

Effie:

I get it. We definitely wanna have fun in college, but we also wanna make sure we set ourselves up for success academically and financially doing your research, your due diligence and setting up those financial skills. Now can help you have fun in college and definitely help you have fun in the future. The Obermeyer Wood's dollars and cents podcast is created by Obermeyer Wood investment council and SEC registered investment advisor. The information provided is for informational and educational purposes only and does not constitute financial investment tax or legal advice statements by individuals reflect only their views and not those of Obermeyer Wood Investment Council, L L L P. The information in this podcast is not intended as investment recommendation or financial planning advice, and should not be used to make investment decisions for more information about Obermeyer Wood Investment Council and its services. Please visit us on the web at www.obermeyerwood.com