Women & Money: The Shit We Don't Talk About!

Student Loans 101: What Every Borrower Needs to Know with Elaine Rubin

• Barbara Provost & Maggie Nielsen • Episode 89

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Ever wondered why student loans feel like a black hole of debt?


In this episode of 'Women and Money - The Shit We Don’t Talk About', we cover the often overwhelming topic of student loans with our guest, Elaine Rubin. Elaine is a bilingual student loan and financial aid expert with more than 15 years of experience in federal and private student aid. 


Elaine shares her personal experiences with student loan debt, offering strategies for managing loans effectively. This episode covers the pitfalls of taking out too many loans, the importance of long-term planning and budgeting, and the various repayment options available. She also stresses the importance of understanding the terms and conditions of student loans to avoid long-term financial burdens. Many challenges faced by first-generation college students bring heavy impact on women's financial independence, especially when balancing career and family. The episode expands the need for smarter financial decisions and the importance of seeking expert advice to navigate the intricacies of student loans.


Listen to this episode to learn about effective strategies for loan repayment, the pros and cons of Parent PLUS loans, and practical advice for managing student loans without sacrificing your financial future. 


00:00 Intro

05:57 Expert Insights on Student Loans

08:37 Elaine's Personal Journey 

13:13 Common Mistakes and Strategies for Managing Student Loans

16:31 The Impact of Student Loans on Families and Future Planning

23:57 Strategizing Loan Repayment

25:04 Simplifying Financial Aid

26:14 Scholarship Strategies

29:06 Advice to My Younger Self

32:16 Understanding Loan Interest Rates

37:24 Balancing Debt and Life


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Maggie: I do have student loan debt and I thought going to community college was gonna be like, oh, then I would walk out with no debt, but not quite their darling. 

Barb: You do have a fantastic degree from a wonderful organization to show for it. So it wasn't like it was off or not.

Maggie: Yeah. You learn more than you think, 'cause in school you don't know how you're gonna apply it yet. But then people always ask me like, what are you getting your MBA for? I didn't have like a specific job, but when I was job searching everyone's like, oh, we'd love to see an MBA. And I was like, yeah, you're right, me too. So I got that. Then I'd go to these job applications. They're like, ah, we'd love to see two years of experience. And you're just like, really? Because two years ago you wanted an MBA, not two years of experience.

It's a little bit of false advertising sometimes out there.

Barb: Yeah, well, you have it now. The thing I say about education is it's an investment in yourself. No one can take it away from you. But you really have to make smart decisions when you're thinking about these student loans. I'm so glad we were talking about the student loan topic because it just seemed to me like a big black hole, very complicated, expensive.

My biggest concern is that they easily give this money away to young people who don't have any income, and yet they'll easily give them a hundred thousand dollars when I probably couldn't get a small business loan for that. It's just crazy the way that they kinda give the money away.

It makes me mad almost because it puts people in such debt that they're excited about spending that money and going to college, but they don't realize the implications of that long term, which are vast.

Maggie: So I just went and went five years and got her done and called it a day, and that's kind of the path I went. But you wanted, you paid as you went. You didn't really take out those loans and that's how you kind of staggered and got then your master's and then got your doctorate when you were having us. I think it's different when you are older, you understand money a bit better and you choose to pay for that degree 'cause you know it's gonna further your career. Some of your like thoughts of like why you wanted to do that? Or did you weigh, like the expenses of it. because you didn't do it right when you were 18, I guess, is you didn't just do that to do the thing.

Barb: No, I had no intentions of going to school, but when I was like 22, I realized I was in a career funk because I didn't have a college degree. So I went to a junior college and I remember I paid $33 an hour. So a three credit hour course was a hundred dollars, but you know, I was working as a teller something at a bank and then waitressing at night and I was living on my own.

So, that's how I paid for my college. Just one check at a time, one semester at a time. 'cause I'd only take like two courses. Three if I could manage all of that because I was working two jobs. 

When I went to complete my undergraduate degree, I went to a local college because I was still working and I just paid a check. I didn't even know how much it was, but every single month. But the other thing was, is because I was working full-time, my employer paid up to like $5,000 a year for tuition reimbursement.

So I took full advantage of that, which was really great. Because that helped me because I was making a meager wage, still working two jobs and going to school so it just, one paycheck at a time. I'd never even considered getting a loan for it. I just figured I'd pay as I go. When I got my doctorate, it was a state school.

It was very good school. But again, it only took like two courses this semester. It took me a long time, but financially it was manageable because I would just pay for two courses a semester. So I just paid as I went for the most part. I found the most expensive thing were the books. When they'd come in with all the books and it'd be okay now we'd sit down, they'd go, okay, now it's $300 for just the books for this class.

And I was like, wow. That really is a pinch in my budget. But it was a whole different methodology and always leverage the student reimbursement from my employer, which was a huge help.

Maggie: Yeah, I think that's just important to talk about is there's different routes and so many of us, I kind of had that feeling like if I stopped, I wasn't gonna go back. 'cause I would just get in out of the routine, out of the gist, which of course, you could always step back into. But we also have talked to so many women who do find it really important to go extend and get that career or that education, which I also understand as well.

And so it's just how do you balance all of this and I like that you kind of did it slowly, you didn't do it in a rush or you're not like, I'm gonna quit working and do this full time. It is kind of finding that balance, which is hard to do.

Barb: Yeah, it kept me busy because well, I like to be busy, but I always worked two jobs and went to school for almost 20 years. But that's okay. 

Maggie: You 

also talked about how you brought. The week after you had 'em, to class. 'cause you're nursing and you still had to go to school. That's a lot. 

Barb: Well I did. He was due on a Saturday and we had these full day classes, like eight hours of class. And if you missed one eight hour class, that's like three classes. So, I had to call my instructor and say, I can't come in 'cause I'm having a baby. Then the next week, yeah, I had him in his little carrier and waddled back into class, and he came with me.

So dedication, I guess, but I had to get through it. You had a limited amount of time and I had to get through it. So you do what you have to do.

Maggie: I think that's what we kind of pulled out of this whole student loan conversation is you have to do what you have to do. Whether that's getting a job or applying for those loans, being really diligent about what the money is, what you want your goals to be, and how you wanna kind of approach that.

If you do wanna get that degree. Is it extending it out longer? Is it applying for more loans? Is it applying for more grants and scholarships, or is it taking on more loans? What's the best way to kind of go about that? That's what Elaine really dove into is she has helped so many people understand the student loan process just from first generation or first time students.

Barb: She really simplified it in her answers.

Maggie: Agreed. A hundred percent.

Barb: I enjoy talking to her a lot because I have concerns about student loans and the impact on women since they hold the most student loans. But the one thing I took away is you really need to understand what you're signing for and what the long-term costs are gonna cost you over the next 10, 20 years.

Let's unpack what Elaine has to say in her expert advice around student loans.

Gloria Steinem once said, we will never solve the feminization of power until we solve the masculinity of wealth. Barbara Provost and Maggie Nielsen are the team at purse strings that will help you navigate the ins and outs of financial independence so that you can be financially fearless. This is women in money, the shit we don't talk about.

 

Maggie: Elaine, thank you for coming on Women and Money, the Shit We Don't Talk About. We are so excited to dive into this conversation today about college, student aid, paying for college, all that good stuff. But before we dive in, I would love to hear a little bit about who you are and what you do so the audience can get to know you.

Elaine: I'm so excited to be here.

My name's Elaine, and thanks for the great intro. I work for a company called edvisors, and that's who I currently work for, but I've been working in higher education policy for more than 15 years now, and I'm also somebody who had to borrow money and had to figure out college and had to go through the whole process.

So you can add a few more years to that on top of that as long as I've been in it. So currently the company I work for is edvisors. We help people plan and pay for college. We offer great resources and information. Anything from the FASFA and getting through the FASFA process all the way through student loan repayment.

And there's been a lot going on with student loan repayment in the last several years. Trying to manage that and figure out strategy has been a lot to keep up with and there's been a lot of information. edvisors is really trying to help break that down and provide that information to students and their parents because we know parents are heavily involved in the process and' the FAFSA has also faced its own set of issues in the last few years. It seems like it's been better and we're getting out of that.

There's been a lot of confusion and a lot of stress and frustration when it comes to picking colleges, paying for colleges, then dealing with the aftermath of student loans if you had to borrow.

Barb: And this is exactly why we wanted to talk to you. First of all, it's confusing, second of all, I think they sell a bill of goods to way too many students, and the students end up with a lot of debt they weren't aware of, and it costs lifelong impacts. So I'd love to really dive into this conversation.

Maggie, I know you have some experience with this.

Maggie: Yeah, I have student loans just like everybody else. So I've been keeping my eye on the news, what's going on and all those good things. But let's start with kind of your story just at the beginning here as a first generation college student from a multicultural background, what challenges did you face kind of navigating college finances? Cause they're not clear. They're not easy.

Elaine: It's definitely not easy and I would say the problem I faced is I didn't have any challenges. I thought at the beginning. I was just trying to figure it out. My mom didn't go to college in this country. So, we had to figure it out from the beginning and I didn't really know what to do. I grew up in a really nice town in Massachusetts.

A lot of great resources. But most families, I wouldn't say all of them, but most families just in my high school could afford college or at least had parents really involved in the financial aspect of it. I came from a mentality and a background of college, you borrow money, you pay it off.

It's fine. Don't worry about it. But the problem when I went to school is right when everything really started increasing in price. So we were seeing 300 percent increases in price over a very short period of time and the people we had known that had gone to college were able to borrow modestly, pay it off, and they moved on.

And then I got stuck in a situation where we were like, let's just make the decisions to get me through college, we'll be fine, and we weren't really looking at the impacts. Because we had seen so many people just handle it and move on. That was a huge struggle and then I got a job right after college.

So, I went to Northeastern, which was a great university. I got a lot of learning experience. I got a lot of job experience. So, I got a job as a regulatory analyst for a federal student loan guarantor. This is a company that was the middleman in the FFEL, Federal Student Loan Program, an older student loan program that no longer exists.

But the loan still exists and essentially we were taking on anybody who had defaulted on their loan with their lender. It would be assigned to a guarantor and then we would work through financial literacy to get these students back into good standing to make sure they could repay. Then I was starting to see all the different mistakes I had made that got me to the point where I had been, because many other people had already done it. As a regulatory analyst, I've really gotten into the higher education policy aspect of it. So, reading the Higher Education Act, reading all the regulations, the Federal Student Aid Handbook, and also working with that fell community of lenders and schools and guarantee agencies, it was so eye opening. I was only there for a handful of years, but that really made me realize what I wanted to do and where I wanted to take my career. There's a lot of people who go into this a little blind and they think they'll just handle it and they'll manage it. I think the conversation has changed a lot in the last few years.

The student loan debt crisis has definitely changed and involved the conversation that people aren't jumping into debt without thinking twice. And they're really looking at long term impacts and trying to figure out, what can I afford, what's a realistic salary once I graduate, and when can I expect to actually pay this off.

Because unfortunately, I was in that bucket as well, the impacts of high debt relatively entry level incomes for a significant amount of time and trying to manage it all and put it all together and figure out how to get out of it. So, that's a bit of my story of how I ended up here and what I've seen throughout the years.

Not only trying to get my story across but also helping others to avoid it. Especially those families who may not have a parent who's involved or doesn't understand the process. Because I have the most supportive parents in the entire world, but not understanding the impacts of how this can affect you later really was a bit challenging to navigate and unraveling it later so much harder than avoiding it altogether.

Barb: Well, you just said a mouthful because all of that is exactly what we want to unpack today in terms of students who want to go to college think they'll just take out this loan and they can easily pay it off because they're going to get this great college education.

They're going to land a super cool job and they're going to earn more money than they ever did before. So they'll be able to pay it off.

Elaine: Yeah. And that's the mentality going into it, which is really great and optimistic, but we need to bring in a little bit of the reality about when that job will pay off, because for most, some people are very lucky. They can jump into something extremely high paying over time. At the beginning, sometimes you do have to rough it out and figure out how to get yourself to where you need to be.

Maggie: Yeah, a hundred percent. It's easy when you're 18, they just give you those loans like nobody's business and you want to do everything that everyone else is doing. So it's easy to kind of fall into that trap and just overspend for that college education. What are some common mistakes you see students or parents making when they're taking out these loans for college? 

Elaine: So one of the most common mistakes I see families and students jump into is really trying to scrape together those funds for that first year and then forgetting that there's multiple years after that for most programs. Once you're kind of in it, it's harder to step away. So, you're two years in, you're three years in, you already have the credits you know you can't transfer most of them because of transfer rules between schools, and you can't afford it anymore. Usually those last two years can be really critical because those could be the years that you aggressively just want to get there and you want to finish. And, you'll do anything possible.

So, not planning for four years is one of the biggest mistakes I see families make. Then that whole idea of borrowing money. Not understanding that concept. You're never gonna be paying a dollar, the same dollar back. You'll be paying a dollar plus interest. And there's a few things that students can do to set themselves up.

If they're looking for public service careers, then there's things in the federal program like public service loan forgiveness, which at this time is a very real option for students. But it does require that 10 year commitment. So if you're one of those students, sometimes it's always going to be case by case.

This particular strategy may not be what you're aiming for because the goal is to always pay as little as possible. Get as much forgiveness as possible if you're eligible, but for some students, if you do have interest accruing, you can start covering that interest while you're in school so you can really start bringing down that overall cost of the loan.

Now they've changed some of the rules in the past few years about capitalization or adding on that interest to your balance. The one good thing about federal student loans and most private student loans is that it's simple interest. So you're only being charged interest on your balance, not on any other outstanding interest that could be, I call it buckets in a separate bucket. So if you can really start paying down your interest so you don't get a large interest bucket because of the way they apply your payments, that's the faster you'll be able to really start attacking your principal, which is going to bring down the overall cost of your loan, but also will help you pay it off a lot faster.

So if you can stay in control of your interest, that would be absolutely fantastic. And then another, I would say the third issue I see is the Federal Student Loan Program does have a lot of really flexible repayment options. But just because they're flexible and available does not mean it's in your best interest, for lack of a better word.

Plans like income driven repayment plans are great if you're working for things like public service loan forgiveness, or you're avoiding defaults. But my goal for people is to always trying to tackle those student loans the best way they can and try to make compromises in other aspects of their lives.

Not sacrifices, but compromises to really make sure that you're targeting and pay those off or else they can hang over your head for a very long time. Having 25 years to repay something, a lot happens in 25 years and that time just flies by and to have that just looming over you is really challenging.

A lot of the borrowers I work with, their biggest complaint is, I've been paying this for 15 years, 20 years, I feel like I'm going nowhere. It's because your payment is relatively low. So if you can get it up higher, you can get yourself out a little bit quicker.

Barb: It just seems like it's too easy to get these loans. I couldn't get a small business loan and yet my daughter was able to get all this money for school and she doesn't even have an income. So, do you think there's concern about the ability to get all this money for school when really the person getting sucked with the loan really doesn't have an income to pay it back.

Elaine: So that's the challenging thing with a student loan, right? We're asking people to make commitments to pay later on expected income and a lot can happen in that time. So, while they can be a very valuable tool, and many students need them, because the cost of college is extremely high at some schools and it's just unattainable.

Even some of the public schools may not even be affordable for some families. So student loans can be used as a tool, but they should never be used as a tool for luxury type items. It should be really kept as close as possible to what you need in order to get through the school year. 

Direct loans, they do have annual limits and total aggregate limits for undergraduate students and graduate students. So those can be reined in a bit, they can add up over time obviously but then when you start looking at things like plus loans that could be given to parents or graduate students, a parent or a graduate student could borrow up to the cost of attendance minus other aid for their student every single year with very minimal credit checks.

And that's where we can see a lot of trouble happen quickly because we know, unfortunately, with the cost of school, you could get all the financial aid possible. You get your federal grants, you get some school aid, you get some state aid, and you could still be 20, $30,000 short per year. And I have one story that actually brought me to tears.

I was giving a presentation to a high school. And one girl raised her hand, all excited. She had her award letter, because we were going over them. We said, we'd be more than happy to go over any questions anyone has. We were looking to do it more on a personal level, but she was so excited, she wanted to ask.

She goes, I got full financial aid. I got full financial aid. Very excited. It was her dream school. And we look at that financial aid award letter, and there's a 25, 000 plus loan for a parent on there which requires not only the parent to borrow but then the parent needs to qualify for and we had explained to her what that meant and she was in tears by the end.

It was probably one of the worst experiences I've had working with somebody just because she was so excited and we had to be the ones to let her know, that's year one. So if you need 25, 000 this year, you might need that or a little bit more with college increasing every single year for the next four years.

So by the end your parent could have 100, 000 in a Parent PLUS loan. And then on top of it, at the time it was an EFC, the expected family contribution, was indicating that she was at zero. So this was a low income family in a really rough situation, and it was a bit heartbreaking. So practices have changed at a lot of schools to not package those or try to explain what it means.

It is a bit easier, so it seems like a way to open the doors. But I think the message now is you really have to look at your return on investment. You have to look at what you can reasonably afford and what you can repay and make decisions from there. And be aware of what you're signing. I think these days that's more important than ever.

In anything that you do, signing up for anything, you really want to understand what you are giving access to or what you are giving up in the future because if you are borrowing money, you are giving up some of your financial stability in the future until that's paid off.

Maggie: Yeah, that's a great example and really explaining that parent plus loan as we see so many people take out those loans and that puts the retirement at jeopardy. Then sometimes it's like, well, my kid was going to get this big job and support me, even though I never told them that that was my plan in my head and they make those super available.

They act like they're super common that your parents are going to take out these loans for you. If you took out 100, 000, a couple of years before retirement, that's a lot to pay back. Do you see that kind of in your work, a lot of those parents kind of being more worrisome about taking out those when they have retirement coming up?

Or how do you advise with that? 

Elaine: So typically with the plus loan, we really look at the situation of what else can be done. Because at that point, especially if you're going into your freshman year, you look at some of your other options. What are some of the other schools offering you? Really start comparing those numbers and go from there.

 I love to explain, a really simple estimate. For every 10, 000, it's going to be 120 a month for 10 years. So 10, 000, people are like, I can do that. I think I can figure that out. And then we start saying, okay, 20, 30, 100, 000, what's our rough estimate now? 

Some are like, that's more than what I'm paying for my housing, or my car, a lot of other things in their lives. That's when we start having those conversations about impact. It's one of those myths out there, somehow this will just be forgiven one day. That's a scarier conversation to have sometimes, because that's not really reality.

If you work in things like public service, maybe you have an opportunity with that, but laws can change, programs can change, and those opportunities could disappear over time. We saw that specifically with the Biden administration on trying to do versions of mass forgiveness, and that was just not authorized and couldn't get through.

 That did create a bit of confusion as well because people were just expecting their loans to be forgiven one day. They were going to wake up and it would disappear and that didn't happen for millions and millions of people because we saw millions get forgiveness, but there are, I think, about 45 million student loan borrowers out there.

So it was still a portion. And even with the amount of forgiveness that was offered under the Biden administration through different avenues, we did see the overall student loan balance increase. So while there were impacts, that doesn't necessarily mean the impacts are going to affect every single person.

Maggie: yeah.

riverside_dr._barb_raw-video-cfr_women_and money pod_0076: Yeah. So what's a lesson you learned when you went through your own student loan experience? Like what would you have done differently?

Elaine: So when I first started repaying, so I actually was someone who needed federal and private. I was prioritizing minimum payments because that's what I had to do. At one point in time I just needed to pay them. I just needed to pay them and I didn't need to have delinquencies or defaults and I needed to figure out.

And that's okay for a period of time, but over time you really need to add strategy to what you're doing. So, at the time I was working in the public sector. I was working for the federal government. So I was like, why am I focusing so much extra money or efforts to Federal loans, when I could potentially qualify for things like public service loan forgiveness, I should really be attacking these private loans.

And what I had learned in the private loan world, in some ways private loans are very simple to pay off. You don't have a lot of options. You kind of pay based on what you were given. I didn't have any prepayment penalties, and I double checked that in my terms and conditions, and I was attacking those loans just to get them down because I just felt like if I ran into any issues in the future, hardships or anything, I have so much flexibility with the federal loans.

I could go into deferments. I can put them in forbearance as a worst case scenario and those private loans. I tried calling them to see what my options are, and they were basically like your option is to pay or you default. And I'm like, okay, well, that, that makes it simple. So in some ways, having no options made it quite simple to figure out what I needed to do.

So then I started adding some strategy to my repayment and prioritizing loans. Because the one thing we've seen with repayment accelerations is sometimes people accelerate all of them and the impact is minimal. Because when you think about it, if you're only paying 5 extra on all the loans, you're not making that great of an impact.

But as long as you're making your minimum payments that you're required to, and you attack one with either the highest interest, the smallest balance, however you want to do it, just based on your strategy, you can take all those 5 and maybe start, because most people have at least four loans, maybe they have eight or nine you can take that amount and even those little five dollars here and there start adding up really quickly as hundred dollar payments extra to one particular loan.

And then you're paying off any outstanding interest quickly, any accrued interest, and then you're attacking your principal, which is the goal there is to really start bringing your principal down.

Maggie: So it's like that snowball or that avalanche method when you're looking at your debts, which makes a lot of sense because it feels overwhelming. So you do just kind of spread it out and, kind of get crazy about it. Just like take my money, right? But it's, you do need to have that strategy to make the most impact.

But we don't want to forget those minimum payments because otherwise those are extra charges that we have to deal with which is not what we're looking for at that time and so I know many borrowers feel overwhelmed by this financial aid process so what are some ways we can simplify things?

 

Elaine: The best way to simplify is to really come up with that plan. I like to tell families to create budgets, not only for year one, but all four years. Along that budget, start setting some constraints on how much you can comfortably repay if you do need to borrow student loans. So send a number and aim towards it because that will give you something to work towards. So, if you know you don't want to borrow more than 10 15,000, for your entire college journey, then you're going to have to work for it. You're going to have to figure out how to do it. So, you're going to do all the financial aid forms that you need to, the financial, the FAFSA form, if your school requires things like the CSS program.

profile, but then you're going to want to do more research into your state. How does state aid work for you? How do grants work for you? Maybe make decisions on in school tuition schools that you can go to that could save you some money there. And then look at some of those schools, scholarship and grant opportunities as well.

You have to do the work and you have to do the research. It can be especially for that student, the equivalent of a part time job, then looking for scholarships. Look at your high school, look at your community, and start really working towards it, because if you really want to limit that borrowing over time, you will have to put some effort into it.

I would love to say everyone gets everything they need and more than they need, but it doesn't really work that way. So it's really working towards it and setting some goals for yourself. And it does take time, and you're not going to get every scholarship, but I always recommend students, I don't care if it's 50, 500, 1,000 or, 10, 000 scholarships.

Those are fantastic, but there's usually high competition there and they require a decent amount of effort. So put in the effort if you have time for it, but really start focusing on those smaller ones. My high school is one of the best resources that I had and I didn't even know this was a thing until my high school counselor said fill this out and I said okay and what is this and it was a just a scholarship application and I remember that day I would say an average student I don't know if this is like everybody else's high school but you always knew there was like a handful of kids that always got picked for the awards and that just wasn't me and then there was this last day, and they were giving away scholarships, and I got called up like five times for scholarships at the high school, and everyone's like, what did she do?

And I'm like, I'm asking the same question, what did I do? And what I had done is I filled out the form, I completed all the requirements of it, and not everyone does it, believe it or not. 

Maggie: And I think you've got to remember when that feels tedious or it feels like a part time job. It's like, okay, but what's my time worth right now? 20 an hour before my college degree, right? And so if I'm gonna be paying 10, 000, 120 a month for 10 years, I don't mind putting in a couple hours now if I don't have to pay that month over month.

So you keep back and keep coming back and reevaluating like this is worth my time, even if I got 50 bucks, but it took me an hour to do, that's 50 an hour. That's not bad. Where else am I getting that? And so it is really understanding it does take time, but it can be well, well worth it.

And I'm sure, I mean, if you walked away off that stage with five grand, that's huge just for filling out a form.

Elaine: Yeah, and the other thing I would say with scholarships is don't stop after that freshman year. For some reason, there's this huge push to get in the door, and then you forget about it. It's a weird phenomenon. Some people are on top of it and they know that what's coming up, but a lot of people will wait until the last minute or think they'll figure it out or they're not communicating with their parents or anyone helping them pay and their parent is like, Hey I don't have as much as I thought I would and now you have to come up with gaps, and you have to figure it out.

So the more time you put into understanding what you're paying for is really your entire program's commitment, the easier it'll be if you don't step away and give yourself some time to just completely ignore it until it becomes a problem.

Barb: Yeah, so what would you go back and tell your younger self, what kind of financial advice would you give your younger self about this whole process?

Elaine: Credit balance refunds, I don't know if you know what those are. When you get your cost of attendance for your school, there's more in there than just what you owe them. It'll be housing, food, transportation. Some you owe them for that, but whatever's left over in that cost of attendance is considered what you need to get through the school year.

Because this assumption of you're going to be busy with school, you can't be working full time jobs necessarily. What happens is you get a combination of different things. But if there's loans in there, you want to be careful if you're overpaying what you owe the school. Because they'll give that check back to you.

And coming from someone who did qualify for a lot of need based aid that amount of money was the most money I'd ever seen in my entire life being handed to me and I've been working since I was 13 babysitting kids in the neighborhood and working one hour photo lab, I'll date myself because I'm not sure if everyone knows what those are, but I'm working there, earning my paychecks, supporting myself for the things I want to do.

Thankfully, my parents were very much like, that's for you. I should have saved it. That's a thing I would have told myself, but when you get these credit balance refunds. If it is loan money, really start making a real budget for yourself so you don't overspend it, because there's no reason to spend any dollars that you don't need to spend. 

Having that almost like that peer pressure effect. If you're seeing other students and other friends of yours being able to go to eat lunch every day off campus, and you have the meal plan and you don't want to go there by yourself, think twice about that. How much is a lunch down? 12 meal? That 12 meal over time could be a 100 meal and you're just not thinking of it that way because it's going to take you 25 years plus to repay that.

Elaine: So just making those decisions and being really careful with those loan funds. I did have enough scholarships that I probably could have made it work and I could have returned some but I wasn't thinking that way. For some reason I thought it was mine. And it is mine, but it's mine and then it'll be my problem later.

So I really should have made some better decisions about being budgeted and making sure I was more in control of my finances. I think going to college right out of high school, you have this mentality of being on your own, and you have this freedom, and nothing can affect you until it does. And then you really have to be careful with that.

Maggie: Yeah, that's a great tip. I 100 percent had a friend who used that extra cash to buy a really nice wardrobe. You want to look good at college, right? Get the nice Patagonia backpack and some really good shoes. It was above and beyond what was necessary, and it was not realized that like, you're kind of buying that Patagonia backpack

on something similar to a credit card. You're paying that interest on it, and you will have to pay it back. So if you do spend that extra grand today, it's going to be paid back later. And those dots were not connected at the time. And I definitely knew that was like a regret they had later, but it didn't quite make sense because they did give you this money.

So you're like, it is my money. I will spend it how I please. So I'm really glad you highlighted that point because there is an easy misunderstanding there.

Barb: What are the student loans at today? The interest rate.

Elaine: oh boy so the Federal Student Loan Interest Rates, I believe they start is it the fives? And they go all the way up to the, almost the ninths.

Barb: So when you get a loan, that rate is stays, right? It's simple interest and at the time of the loan, whatever the rate is, that's what your interest rate is.

Elaine: Yep, I believe the cheapest interest rate might be a little less than five percent. It's the highest we've seen in a long time and they are fixed rates. The Federal Student Loan Program, there's no way to reduce your rate, really, in the grand scheme of things. So if people think, I'll consolidate, which they think is refinancing, but if you keep your loan federal, it's not refinancing.

It is merging two or more loans together, making them one larger loan. These days, it's very case by case when I even consider asking someone to consolidate. If they're doing it to qualify for something, if they're doing it to gain eligibility for something, that might be a consideration.

But now that all loans in the federal program are direct they're already in the program that's offering any sort of benefits. So consolidation won't do it. It takes the weighted average and it actually rounds it up to the nearest one eighth of a percent. So your interest rate isn't going anywhere, really, and then it's going up slightly.

 There's little things you can do, like go on auto pay and have a slight interest rate deduction, but that's about 0.25%. It helps, but I wouldn't say it's the most significant thing. And then the other thing is when you have a federal student loan, because you have all those benefits and potential for forgiveness, or help if you're in hardships, it's hard to advise anyone to really give up those benefits.

It takes a very specific borrower for me to say, maybe look at a private student loan refinance. Sometimes those are mainly parents or graduate students are earning so much that we don't expect them to qualify for anything under the federal program and they have the means to pay it off quickly and they can reduce their rates so you can become more efficient with your repayment.

But for the most part. Most borrowers, it doesn't necessarily make sense to give up those protections, especially if you're living close to paycheck. If something were to happen to disrupt your life, would you need the protections to help you through to maybe put your loan in a forbearance or a deferment, which is offered in the federal program, which is not as easy to get in the private program. 

Barb: So what happens if people just don't pay their loans back?

Elaine: Oh, that's very bad. So over time you go into delinquency and so you'll start getting your Federal Student Loan Servicer contacting you more and more, sending you 

letters, asking you to pay. They send you a lot of emails, I mean, it's the best contact you'll probably get.

They are restricted on how much they can contact you, but they'll start trying to contact you. If you go to a certain point, you will default. In the Federal Student Loan Program, it takes about 270 days for that to happen. It is a significant amount of time, where a lot of actions can be taken.

But, if you default, you'll have that not only ruin your credit. You'll be reported to the credit bureau. You'll actually be reported to this agency called CAVERS. And CAVERS is anyone who defaults on a federal debt and even if you clear up I've actually had a few people in the last several years say that they want to buy a house.

They defaulted on their federal loans, they cleared it up, they've cleared up their credit as much as possible. And now they're getting flags on their CAVERS report and that's a little harder to fix because it's mostly waiting it out. So if you anytime you have the house of your dreams ready to go and you're ready to just jump in, now you have to wait for the cavers to clear It is more of a federal registry and it happens at certain periods and I don't think I've ever successfully contacted them to help anybody through this.

It's just a system and it gets updated periodically. It'll go away eventually, but if you're stuck in a situation where you need that credit immediately and you've resolved everything you can resolve, that's one you'll have to wait for. Then once you're in default, you lose all those benefits for your federal student loan.

So you don't have the option for deferment, you don't have an option for forbearance if you run into hardships or anything like that. The federal student loan program will allow you two different ways to get out of default. One is a student loan rehabilitation. We have to make nine voluntary payments and then once you can complete that they'll return you to good standing and allow you to repay under those benefits and some bars have the option to consolidate out of defaults to get that default resolved quickly and then you have to be eligible.

You need to be able to consolidate something together in the federal program. It's not like refinance where you can just take one loan. and refinance it there's very limited circumstances where they'll allow that to happen in the federal program. There are ways to get out of it, but once you're in default, you get added collection costs of almost 25 percent on top of your interest rate.

 There are a lot of negative consequences of defaulting and I've heard borrowers just tell me I'm just not going to pay and I'm like, I really don't advise that. I don't give a lot of advice. I give a lot of information, but when it comes to that, that is one place where I'll say I will tell you that is something you do not want to do.

 There's a lot of ways to avoid it in that federal program if you need it. The deferments, the forbearances, the income driven repayment plans. There are ways you can avoid it in that federal program.

Maggie: It's good to know that there are people like you out there to support with this, to help understand all of it, and to know that if something does happen, if health things, job things come up, there are options versus just putting your head in the sand and ignoring it and you could just call someone up like you to walk through it and get that step by step process so it doesn't affect you forever, but maybe you can get six months of some breathing room while things are happening and transitions are being made which is good to know about. So it doesn't have to affect us forever. 

Barb: This has been really a great conversation. I'm so glad we had it because, student loans, overwhelming, kind of a black hole, lots of acronyms. And I don't really know how to manage all of this, but you've really clarified a lot of the more, I don't know, typical questions or concerns that people have had.

I know from purse strings perspective, where we focus on, I think the stats are that more women carry student loan debt than men. Unfortunately, what we say is, oftentimes women have to overeducate themselves to be competitive in the workforce. So they take out student loans and they do that.

But who has the babies, right? Women. So they might be in the workforce, earning a good living, paying back their student loans, and then maybe they decide to have a family. And when they do, they're like, I can't go back to work because it's not affordable for me to, or I just don't want to raise my children.

Well, you still have to pay back those student loans. Remember, you're going to make all that money and pay it back so easily. Now you have a baby. So it's very complicated. I think so many college bound families and children really need to think about consequences long term of these loans while they can be so wonderfully beneficial.

You really have to know what you're signing.

Elaine: I completely agree with that. I am a newer mom, I have a two year old, and there are things now that I look at cause I had children a little bit later than some of my friends, and what they were doing is paying off their student loans and trying to save for their college at the same time.

So now we're like in this odd, double dipping world of, you're paying for two colleges. One's future, but you don't want your child to go through what you went through, and if you can prevent it, a lot of families are choosing that. I also see that with women in the workforce is the decisions you have to make. Sometimes the decisions because of student loan debt are not what you would have preferred. You might have to really work and hustle to get through it all. Then I've seen some of the strongest women in my life who are single moms without much help, and they have to juggle it all. Their student loan debt, their children, and it's a lot, it seems so exhausting.

And they're really strong women to figure it out and get through it. They always tell me there's no option.

If you have something like debt and honestly when it comes down to it, student loan debt is a huge impact to somebody's life. Unfortunately, what I've also seen, it's not the only debt somebody will carry.

So credit cards are mixed in there, car loans, housing, mortgages, other things. So it's really trying to navigate and balance the whole package. I wish I could say the strategy to tackle your student loan debt would work for everyone, but when you look at someone's actual debt portfolio, you have to look at what's most important to tackle first and go that way.

So unfortunately it's just a sliver in many people's lives, but that sliver is significant along with everything else and it can be really challenging.

Barb: Well said.

Maggie: Elaine, there is a question that we have everyone answer on our podcast and that is, what is your definition of financial freedom?

Elaine: So I was thinking about this a lot. I think that's a great question because, I actually talk about that a lot with helping someone determine their definition of success. Because it's so different for everyone. I think my definition of financial freedom has changed significantly throughout my life.

 I'm at the point of my life where I just feel comfortable and I don't blink at paying the bills. I feel like a sense of relief for that. Because debt, no debt, doesn't matter. If you have bills, which you generally do, if you stress about them every month, it can create such a burden. And I've been a sleepless night person, just going through the scenarios in my head

of stress and sweating, even in college, about tuition bills due. I don't think it really ever stopped until I felt a sense of my husband and I working through a lot of our financial goals and getting to a point where the bills come and it's not even a thought. So, right now that's where I am. But right now I think financial freedom for me is just having that comfort and stability of knowing everything's okay. We'll be okay. The bills will come. Unexpected bills will come. We lost an HVAC unit in Las Vegas, that was an unexpected bill, so the fact that we could just handle it was so relieving to us.

With a two year old, with child care added, everything, we just felt comfortable. So that's where I'm at with financial freedom, is knowing that the bills come, and if you can comfortably breathe through paying them. That's really great.

Maggie: I'm sure you're getting that a much better night's rest, which is important when you have little ones. You can't have finances and children keeping you up. So I'm glad you're feeling the freedom in that area.

Elaine: I definitely agree with that. He's kind of sleeping a good amount. If he has five days, we know a day is coming, and it's like, who was on duty that night to handle him? Because we switch off. So not one of us has to do it all the time.

Barb: Smart. Really

Maggie: That's smart.

Barb: This has been fantastic. I'm so glad I found you or read your article on LinkedIn. I thought there's an expert in student loans. Women need to know and understand the impacts of their own student loans, parent student loans, and the best way to navigate it.

So thank you, Elaine, for being our expert in this area. We will make sure your contact information is in the show notes, anything else you want. People to link out to we can put down there as well, but thank you for being our go to expert on this topic

Elaine: Thank you so much for having me. This was fantastic.

Maggie: Great. Yeah, this was a lot of fun. Reach out to Elaine. Everything's in the show notes and we'll talk to everyone again soon. But until then, be financially fearless. 

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People on this episode

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Barbara Provost

Host
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Maggie Nielsen

Host