Managing Your Money, Part 1: Financing Your Future and How to Pay for Higher Education

Resources related to this episode

• Use our Financial Path to Graduation tool to help you create a plan to pay for college.
• Visit our student loan portal to learn more about student loans.
• Check out this blog on why it’s important to compete the FAFSA on time.

Episode transcript

Presenter
Susan Bistransin
Teacher, Family and Consumer Science, Prince George's County, Maryland

Moderator
Brian Stone
Policy Analyst, Students and Young Consumers, CFPB

[Beginning of recorded session.]

Brian Stone: Welcome to our inaugural episode of the Financial Intuition Podcast where you can find your inner financial intuition one money topic at a time. The goal of the podcast is to educate, inform, and engage our audience with tools and resources created to help them make more informed financial decisions. These tools and resources can be found on our website at consumerfinance.gov. You can also click the links in the show notes for more information. This is the first episode of a three-episode Money Management series which will focus on financing your future and how to pay for higher education, managing your money as a young adult, and understanding and protecting your credit.

Before we get started, I'll read our Consumer Financial Protection Bureau standard disclaimer. This podcast is being produced by the Consumer Financial Protection Bureau. It's intended to generate discussion about financing your future and how to pay for higher education. The questions asked and topics discussed were developed in coordination with our presenters and may not represent the Bureau's policies on any particular matter. Any opinions or views stated by the presenters are the presenters' own and may not represent the Bureau's views. Nothing said in this podcast by a Bureau representative constitutes legal interpretation, guidance, or advice of the Bureau.

Hello, everyone. I'm Brian Stone, a policy analyst in the section for Students and Young Consumers. Our section creates tools and resources for those working to help students, young adults, and their families manage their money, build credit, save or pay for college, and repay student debt.

Today we have with us Susan Bistransin, who is a nationally board-certified teacher of Family and Consumer Science in Prince George's County, Maryland. Susan has over 34 years of teaching experience, including 24 of teaching financial literacy. Susan holds a Master's Degree in Curriculum and Instruction. Among her many other accomplishments, Susan co-wrote the first Financial Literacy for Teens curriculum for Prince George's County Family and Consumer Sciences and serves as a teacher-advisor for the new FDIC Money Smart curriculum, which was published in 2006.

We're excited to gain more insight from Susan on financing your future and how to pay for higher education. So, without further ado, let's jump right in. Welcome, Susan.

Susan Bistransin: Thank you for having me, Brian. It's great to be here.

Brian Stone: Oh, thanks for joining. So let's start with you telling our audience a little bit more about yourself and your work.

Susan Bistransin: Well, I have—like you said, I've been teaching for 34 years, and 24 of those were focused on financial literacy. That's truly my passion in teaching. I started out teaching that financial literacy course to high school students and had to learn it myself along with them because I was in a financial predicament at the time. It became my passion, and I have been working and advocating for years to try to make financial literacy a graduation requirement. I think it's the most important course that students will take.

Right now in our county, it was an elective, and the best news I got in 2020—there actually is good news in 2020—is that my county school board voted to have a mandated financial literacy course for our upcoming freshman class. So I am super excited and thrilled that this has come to pass, and I think it's one of the most exciting things coming for students in Prince George's County.

Brian Stone: Oh, yeah. It's an amazing topic, definitely, extremely important, and I think especially me, I know if I could go back, one thing that I wish I had, like, in high school, middle school would be a financial literacy course that we sort of learn—or at least I did—learn these things like the hard way after I got into a financial situation, like you said, trying to navigate it, find more information. I was like, "Man, I wish I would have known this 10 years prior." So, no, that's amazing, and I'm pretty sure it's going to pay dividends to the students, so excellent.

The next question is, What does it mean to find a good financial-fit school?

Susan Bistransin: Well, looking for a school that's a fit, you really need a total fit finance as part of that. The simple bottom line is "Can you afford it?" But there's a whole lot of answers to go with that question of "Can you afford it?"

You have a lot of factors in choosing schools for postsecondary education and a lot of options there too, but the biggest issue about being a financial fit is really can you afford it and do you have the money and time to pay off any debt that you may incur.

Brian Stone: Right. And so that's definitely helpful, and we know that, you know, we're kind of currently in the midst of a pandemic. And so do you think, I guess, looking forward over the next few months for a student that's thinking about college or, I guess, who is unsure about what the fall will look like—does any of your advice, like, change for them at least in the, I guess, first semester or maybe the next year as they move forward?

Susan Bistransin: Well, the first semester for a lot of these new incoming freshmen in college is going to be a bigger challenge because while a lot of college campuses are opening now with those safety protocols in line, once students are on campus, they're going to find that they still have a number of online classes. I know this doesn't please the parents very much. My neighbor said, "Hey, if your courses are online, you're going to community college and not going to live on campus. I'm not paying for that because you could do online learning at home."

So, yeah, with the fall, what the first year of college looks like, it's going to be an extremely unique experience for these guys and probably for the future of education, I would imagine. So, you know, online learning, as we have seen when we made our experiment in the spring, it's challenging. You really have to have the correct mindset to focus in an online learning platform, and if you struggle with that, that is something else that you need to look at as far as you personally, "Am I ready to do college?" because if that's the platform you're going to work with and you have problems with it, then it will be something that you need to kind of look at and think about before you get into it.

Brian Stone: Right. Makes a lot of sense, so yes. The next question is, What should students and families be doing at each stage? Like, if they're thinking about college or they may be thinking about, like, maybe a middle school student versus someone in high school versus someone who may have graduated as thinking about, like, their higher education, what advice would you give them?

Susan Bistransin: So in middle school—I did teach middle school for 10 years. So the mindset of a middle schooler is not generally on college, but it was a fun group of individuals to teach. I will tell you that.

In middle school, I think that students are really just finding who they are and learning who you are, what is your learning style, how best do you learn, and what interests you, what type of career might you be interested in going into. And, you know, for middle school students and for high school students, thinking about what career do you want, what do you want to major in, aside from saving the money obviously, but thinking about the future, what type of job do you see yourself in can be a little bit tricky, because right now, even for my seniors that graduated this year, I told them—I said, "You know, you're going off to college. Four years from now, the job you get may not even exist right now because technology and because business trends are changing so rapidly. You know, the job you want or the job you are going to end up in may not even exist. So don't limit yourself as far as "Oh, I want to be just this." Make sure that as you're planning, looking at career options, that you're keeping your mind open and broad to a lot of different possibilities, because you may find yourself in a job that's totally innovative and very exciting to you that you never would have dreamed of when you were in middle school."

Brian Stone: Great. Well, I guess next, what type of funding sources should students look into when they're applying for college, and along those lines, what are some of the funding sources that students tend to overlook?

Susan Bistransin: Well, funding sources. Okay. So the absolute favorite funding source is the one that begins with F and it's free. So anyone who is willing to give you money, that's the best funding source you absolutely got.

So funding sources can come from—obviously from personal funding, your parents. Maybe your grandparents set up a life insurance policy for you when you were little or a custodial investment account.

Other funding sources would be scholarships, and students tend to shy away from scholarships. It's really sad that that happens. There are millions of dollars of scholarship money that go unclaimed every year, and I preach this to my students day after day after day. We look at so many different online websites and see all the different scholarships. There are scholarships for left-handed people. There are scholarships for people who drink milk. So the opportunities for scholarships are huge, and it's not based upon a 4.0 grade average. That's the myth. There are lots of different qualifications for scholarships. It doesn't mean that you are a top student. It means that you never underestimate the power of applying for scholarships.

I think one of the reasons scholarships get overlooked by students is because they actually have to do something to get it. You can't just sign your name. You may have to write an essay. You may have to fill out a report. You may have to talk about your volunteer community service. There are some scholarships that say you can submit a video. There is one that you can get a scholarship for making your prom clothes out of duct tape, which I think is very cool since I also teach fashion design.

So I think that's one of the ones that's really overlooked is the scholarship because there's so much out there, and students really, really need to look and apply. And there's no such thing as applying for one, "I didn't get it. Too bad."

Other sources of income looks to legislative scholarships. I know that our representatives in the State of Maryland offer scholarships to students from their districts. Reach out and speak to these people. Community organizations, tons of them have different scholarships. So look into the community where you live and see what's out there.

I guess that's going to lead into the next part, which is what is FAFSA and why is it important. The FAFSA begins with that favorite word "Free." The FAFSA is really important to fill out and complete if you need aid from the government. That's another funding source that can really help you out. It's really important that you understand how it works because you can wind up pulling yourself into a circle of debt that you can't get out of if you're not sure about how to handle it, but filling out the FAFSA means basically giving all of your individual and your parents' information on finances to the government. And they figure out what your EFC is, your expected family contribution or how much they think your family can afford.

When you fill out the FAFSA, what's cool about it is you can identify all of the schools you're interested in looking at, and they will send reports directly to your colleges. You don't have to do that. The other really cool thing about the FAFSA is it's an app now. So it used to be if you hear things about the FAFSA, it's "Oh my God, it's so complicated. It's ridiculous. I can't get through it." That's the old FAFSA. So these days, it's very quick and easy online, or you can use the app. The app is really cool, just came out a few years ago, and you can set up a parent account and a student account that goes into the same FAFSA application. You can put some in. You can save it. You can come back to it later. Very flexible, but they are easy to do because while everybody can't get to a computer, I know very few people who don't have a cell phone. So you can definitely do that.

So what happens with the FAFSA? So when they—you give them your information, and they send you a report. So you'll have some options as far as what money the government will give to you. You can get grants, which are very cool. That's some free money. You don't have to pay them back. You can get loans. You have Federal subsidized or un-subsidized loans available to you, and then there are Parent PLUS loans that you can also take out. And I say this from experience because I had to pay for my kids to go to college too. Your best bet, the un-subsidized loans, you don't have to pay interest on until after you graduate. You also don't have to pay them back until you finish if it's a student loan. These are going to have lower interest rates, much better terms for you than a private loan, but you can also take out a private loan.

The key for taking out loans, though, is you don't want to get swallowed up in debt. So rule of thumb basically when you're thinking about this, got to go back to your college horizon, go back to the big plan. What career am I looking at? What do I hope to gain from being in college? What do I want to get from this postsecondary education? What job? So projecting your goals, you can look at the Occupational Outlook Handbook to kind of see what salary range you're looking at. Rule of thumb is to take that salary, your beginning salary, not the median one or the top beginning salary. Don't borrow a total of more money than you're going to make your first year in a salary. If you keep it to that amount, you can reasonably pay it off with the salary that you have. If you are going into a job that will net you a $40,000 salary and you incur $200,000 in college debt, you're going to have a really hard time with that. So it's very important to understand that loans are available. They shouldn't be your first line of defense. You have lots of different places to find that free money, and those searches should happen first.

Brian Stone: Right, right.

Susan Bistransin: I kind of went to town. I'm sorry.

Brian Stone: Oh, no, no. That's good. No, I agree wholeheartedly with everything you said, and that's what we also try to get across through our tools and through our products to sort of letting students know that the FAFSA is the first step, that you should always fill it out, no matter if you think your parents are going to cover anything or you're not sure. Just filling out the form as early as possible, which is normally after October 1st, it gives you the option. So it gives you the option. You can see what you get back at least from Federal grants, like the Pell grant, any loans that may be available to you, but you can sort of use those resources as a part of your plan, which I would also say a week and a half ago, we released our Your Financial Path to Graduation tool. So I'm not sure if you're aware. It's fairly new. We've been working on it for quite some time, but what this tool does is it's—so if they're—I guess if you think about the senior year, there are four different phases. So a student applies to college. They're accepted. They receive an offer, and then they make the decision. And so we try to catch them between the offer and decision point. So this tool, you take your offer, pop it in the tool, and the goal one day is to have actual college financial award letters integrated into the tool.

But right now, the student can enter their information, sort of walk through these different steps, and some of the things that you hit on as far as, like, understanding how much a college actually costs, understanding—and we pulled data from the Department of Labor, understanding that job that you think you're going to have or you plan to have, at the end of graduation, how much will you potentially be making? So you can sort of compare all these things, which is amazing, I think, before you make the decision.

As you also said, having the rule of thumb, not taking out more than you'll be making that first year out of college info, it's sort of—it pops that in also. If you can see how much college costs, your debt, if you're able to afford that debt, integrate that into some type of budget, and also seeing the income from that goal career, I would say. Those things are all important, and they're definitely things we want students to know before they take on student loan debt and then not understand—or not fully aware of the impact of the debt or how long it will take them to actually pay it back.

So I'll say just as a follow-up to that—so what if there's a student who doesn't have—in their senior year and doesn't have any money saved for college? What are some of the tactics that they can take or maybe some steps they can take to use to still achieve some of those higher education goals?

Susan Bistransin: Well, there's a couple of different ways to go about getting—going to higher education and getting postsecondary education. If you find yourself—like I have so many students who are in the situation. They are in high school. They get to their senior year, never felt like—oh, college is not there—other ways to achieve higher education coals.

Some people are just not ready for college when they're 18. People talk about taking a gap year or something like that. You know, if you have the opportunity and the money to be able to take a gap year and travel the world, hey, that's great. That really increases your potential as a person. Not everybody has got that.

So there's also looking at internship and apprenticeships and going directly into the workforce and going to college, doing your secondary—your postsecondary education when you are mature and ready for it. I have family members who were not ready for college when they graduated high school. They went and got a job. They worked for a few years, figured out what they wanted to do. When they went back to college a couple of years later, they were amazing. They were, like, 4.0 students, where in high school, they just goofed around. They weren't doing that great. They felt like, "School is just not for me. I can't do this." But when they were mature enough, motivated enough, and ready to go, their college experience was amazing.

So there's tons of different ways to look at this . Anything that you do really needs to increase your personal value, your personal skills. So whether you're going to community college, if you're going directly into work, apprenticeship, internships, even coaching a team, doing volunteer work in your neighborhood, all of those things can help to increase your skills. And aside from college, you can do technical school, which is not as long as a 4-year college but can certainly get you to a place where you're making a good salary and can make a good living from the career that you get from technical school.

Brian Stone: And I agree. I've actually—along those lines, I have some friends who, as you say, worked before, who had gone to the military, and I noticed it was a level of maturity and focus that they had when they came into college, because I was kind of a freshman trying to figure things out. But they had sort of been out there in the real world. They knew what they wanted, and they were able to prioritize their time a lot better because I think they had managed some of those adult responsibilities, so to say, after high school went out trying to figure those things out. And I saw it in their grade point averages, just their focus and their trajectories after we graduated. So traditional path is open, and it's what you make of it. It's just having—having a plan and following that plan.

Susan Bistransin: If you have a plan—and, of course, it's great to have a plan. Not everybody has one. So it's—to be able to put one together. Sometimes people fly by the seat of their pants and decide tomorrow, "Oh, hey. I might want to go to college." Probably not your best bet, but, you know, when you are personally mature enough and ready for an experience, that's when you're going to get the most from the experience. Whether it's the internship, the technical school, the college, anything, if you are personally focused and ready, you're going to get a lot out of whatever you do.

Brian Stone: Great. Okay. And I know this is one we talked about, but I just want to circle back to it because it's such a big issue for a lot of folks in society, and for students who are going in college, we always hope to catch them before they sort of make the decisions around student loan debt. And you hit on it before. You said one times the income, and I sort of discussed it, but a good amount of student loan debt for higher education.

Susan Bistransin: Well, you know, I think that thinking about the debt that you incur with student loans, I think a lot of the mistakes that students make about looking at that comes from their misunderstanding of basic credit. And here I am on my soapbox again. I'm going back to, you know, you need to have the basics of financial literacy before you get out on your own, before you leave high school because, let's face it, high school is not reality. College and postsecondary is what real life is.

And when students are first starting out, they have a credit card. They can have those shoes they want right now. They can have, you know, the car they want. They can have anything they want just by swiping that plastic, and, you know, "I'll pay it over time," without understanding the consequences of interest and how it's going to affect their future income. Those things are incredibly important to know when you're preparing for college and looking at a total amount of student debt.

I can give you an example. My daughter had to take out loans to finance her education because I wasn't able to pay for the entire thing. She's 28 years old right now, and she's still paying her college loan. Now, she did follow my advice. She didn't take out more loans than what she was going to, you know, project or make from a career. So they are affordable, but she's still paying them. And she will be paying them for a while. So when she looks at her budget and when anybody looks at their budget and they have a debt, you know, you may be taking home $3,000 a month, and right off the bat, if you've got some loans, depending upon how large those loans are, several hundred dollars of that, you can just cancel that out. That's going to your debt, and it has to go to your debt. It reduces your buying power. It reduces your ability to use your money and to get it to do what you want because you have already encumbered your future income.

So no matter how much money you make in the future, if you have debt, if you have a lot of student loan debt, you're not making that much money. You're making less because you are still having to pay back that debt, and large amounts of student debt last a long, long time to pay off.

Brian Stone: Yeah. Yeah, I know. And it's important just to remember, as you say, like you're spending your future earnings today. So before you even get, like, the big job and start making a ton of money, it's accounted for in some respects based on decisions you make today, so yeah. We just ask that our young people keep that in mind as they sort of make these decisions.

So I guess to sort of segue—and this will be for parents and family members and those who support students. Is it more important to prioritize paying for a child to go to college or a family member to go to college or saving for retirement?

Susan Bistransin: Wow! Okay. This is definitely going to be an opinionated answer because, you know, you've got parents who—of course, when you have children, you want to do anything and everything you can for your child. You want their life to be better than yours. You want it to be an improvement. You want them to go farther, and when you see higher education and college or technical school as part of that package, yeah, you want them to go. And you really want them to be able to get there.

Parents sacrifice an awful lot when their kids are growing up. They sacrifice time. They sacrifice money for the well-being of their children, but I think that it's equally important to make sure that once those kids are gone, you can still have a life. So saving for retirement, I think, is key for all adults and especially starting early with whatever you can, and I think that, you know, the priority between higher education and saving for retirement really is a very personal decision. But in my mind, I would prefer a balance to that so that, you know, I see about my kids, because after your children—after you pay for college, it's a little too late to start saving for retirement. You're not going to get a whole bunch out of it. So you kind of need a balance of it, and if you are putting one over the other, it really is a personal thing. But my personal advice would be to balance it out and make sure that you are saving for retirement. You're taking care of yourself as well as taking care of your kids.

Brian Stone: Great points. So what's the one major takeaway you would want students and families to know when planning to pay for their higher education? I know you mentioned a lot, but if there is, like, one point audience members sort of pull from this, what would it be?

Susan Bistransin: Wow! I have to pick one. Okay. If you want to pay for everything for your child, you have to start early. Use the power of compound interest to your advantage, but you will need to start saving early. So that's my one biggest piece of advice.

Now, can I give a piece of advice for the people who didn't start to save early?

Brian Stone: Oh, sure.

Susan Bistransin: Okay. So if you didn't save early, if you don't have savings, get with your student. Sit with them. Make them apply for multiple scholarships because free money is the best money you're going to get, and there's so much of it out there that's available to you. I think I wrote—for one of my students this year, I think I wrote eight recommendation letters. He applied for about 15 scholarships. He didn't get them all, but he did get some.

And so, yeah, I mean, encourage your students. Stay on them. Tell them writing an essay is not a big deal. It's not going to pull your teeth out to write an essay for a scholarship because it's so very well worth it. Free money is the best money.

Brian Stone: So thank you for joining us today, Susan, and sharing your expertise with our audience. We also appreciate your listeners for tuning in.

To stay connected, please visit our Podcast page on consumerfinance.gov, and so you don't miss future episodes, also make sure to sign up so you'll be notified of new releases.

And lastly, I'll leave you with remember to build your financial intuition and learn money management lessons you can use now to build a future you want. Thank you all.

[End of recorded session.]