In this episode, the team focused on a high-level view of student loans, and also how they would fit into students' overall cost of education financing.
Join students of the Financial Planning program at Minnesota State University along with Dr. Dan Hiebert as they share tips and best practices to help you save, manage, and invest money while in college and beyond. A podcast made by students for students.
Daniel Hiebert
04:17 Greetings, everyone, and welcome to another episode of Mav Money Talk.
• 04:24 Everybody's doing super fantastic. We've got an action-pack episode today, and the topic for today is student loans and
• 04:36 I’ll let Austin describe this a little bit better. But I think kind of the feeling of us on the team is that it's a pretty big topic. So, we're going to break these up into more bite-sized chunks. So, we'll probably have another episode after this one, and maybe even another one after that one. So in threes. And it reminds me, you know, student loans again are going to be our subject for today, you know there's a lot of things going on
• 05:05 politically with Student loans. Some proposed changes and things along those lines, and that's all good.
• 05:13 But I think for us, the topics that we're going to cover, we're going to stay in what we know today and what reality is today. So, you know what what's today. That's what we're going to deal with, and if things change, we can certainly have another episode to talk about the changes. But
• 05:33 you know we're going to deal with what's real today. And as we discuss the topic also to you know. I understand that types of topics like this can be sort of sometimes touching for certain people.
• 05:47 Nobody likes to borrow money. We're talking about student loans, and I think it's also important that these episodes in this podcast is more educational.
• 05:57 We're not going to really give you advice on what you should or shouldn't do. Well, a little bit, but it's really going to be up to you. Uh we're just going to have a conversation based on what we know today, and what the knowledge is, and just help you get thinking about the topics, so that you have a good perspective that are able to make those financial decisions that will be in your best interest. So, thinking for yourself, deciding for yourself, and we're just really here as a resource to help you kind of think through things. So
• 06:25 With that, I'm going to
• 06:30 start it off with Austin. So, Austin, take it away. You all want to do just a quick intro just really quick here before we could jump it into our topic.
Austin Deike
06:40 Yes, sir, thanks, Dan. What's up? Everybody? My name is Austin Dyke. I'm sitting here with Aiden.
• 06:46 How you all doing? And I’m also sitting here with Charlie. What's up, guys? How are we doing?
• 06:52 Yeah, so like, Dan said, we're going to just kind of a conversation about student loans, and they can kind of get uncomfortable. So, before you check out, and you're feeling a little queasy about the topic. Just hang on and just hold on to the information. We understand that everybody comes from different perspectives when it comes to financial situations, and not one situation is better than the other. Some people are blessed, and some people don't have the blessings that others do. So, to know that we're going to give different perspectives. We're going to make it very educational.
• 07:20 We're just going to give you the tools in your toolbox that you need
• 07:24 Aidan and I were sitting down talking about the topic, what we should do, talking about student loans. And, my goodness, we went on for like a couple of hours, just talking in circles about what we could all talk about, and we kind of just concluded we wanted to break it up into some different parts. So, we're going to kind of just focus this episode on the more or less
• 07:46 going from the perspective that you have no understanding of what student loans are, and that could be the case for a lot of student loan borrowers. They kind of just
• 07:55 take it out and have no idea what it is and hope to figure it out down the road. So, we're going to make it. Ah, yeah, we're going to make it just more educational. Explain what it means, explaining some of the dangers. It's been some of the benefits, Because, after all, it is allowing people to get education. Um: And yeah, and just make it educational. What? Ah, what are your thoughts in?
• 08:16 Yeah, you know, to be honest to piggyback off that as well, and to go off. And what Dan said, we kind of wanted to touch on a little bit of the back story of how student loans kind of came into effect. And as Dan was saying, you know, as we can even see right now, they're sort of in an ever-evolving beast.
• 08:32 They're never really set in stone, and they're subject to change. So yeah, I think we're just going to kind of give you a basis of information to go off of and make your own decisions.
• 08:43 Yeah, I came across an interesting stat. I can't remember where I got it from, but it is just a rough stat. It says that four out of ten students don't think student loans are considered debt, and I think that's detrimental to knowing about student loans. So, I was kind of just going to get us started. And Charlie, could you explain to us what debt is.
• 09:03 Yeah. So, debt is just owing anything to anyone for whatever reason. Um, In this case
• 09:12 it'd be because you need education. And nowadays education is very expensive. I don't know the exact rate, or how much education has gone up in the price, but it's something that a lot of people need to take student loans out of, for
• 09:31 if you take out a student loan, you must pay it back, and it is considered a debt, and we'll go over it
• 09:40 in more detail later. But there's different interest rates.
• 09:45 Ah, different times. You must pay the loan back. There's you know, grace periods. There's all this kind of stuff that we'll get into later. But
• 09:56 yeah, that is what that is.
• 09:58 Yeah. So going base off that, like Charlie said. That is just owing anything to anyone. So, when you take out a student loan, whether you know it or not, you do have to take it. You do have to pay it back. Um: Yeah. So that kind of that kind of just goes off to our next question. Really, what is a student loan,
• 10:17 and you want to explain what their lines to us is.
• 10:19 Yeah, I’ll go for it. So, a student loan is money borrowed from a government or a private lender. Ah! Through a private loan. Ah! Taken with the intention to be used to pay for a higher education, usually pursuing a college degree, or in some cases graduate level work,
• 10:36 or above this money. Is money that must be paid back later with the penalty of interest that grows over time. Now we're going to get into a little bit later, I think, paying interest while you're in school and a couple little
• 10:50 situations, tricks, or things to save you a little bit of money in the long run. But yeah, I it is necessary to understand that that these loans do have an interest payment, and then they will accumulate that interest over time. Austin, you got some add on that.
• 11: So, like it is interesting because you say student well, or anything. Oh, yeah,
• 11:10 you don't really know how that works. I just figured it'll go straight to school. But this money that you take out through a student loan, it can be used for tuition. It can be used for room and board. It can be used for books and fees. But what a lot of people don't know. And this is where the slope can get slippery when it comes to student loans is that you can. There is really no restriction for what you can and can't use this money for. So, I've
• 11:34 I have no source but just kids that I've talked to, or I've heard overheard conversations. I've heard I've heard students say I took out, and my extra loan was approved, so I can go on this spring break trip, or I can go. I can go.
• 11:47 I listened to a girl saying that she went on a shopping spree with a student loan, and that's where we want to. Just make this more educational understand really
• 11:55 how student loans work where the bear can get mean and understand that we shouldn't be taking this out for anything other than what we exactly need it for what it's intend for, and that is school. What are your thoughts. Dan:
Daniel Hiebert
12:09 Yeah, I totally agree. I didn't know that that's a good point, and I’m with you. I think there's a danger in borrowing too much money. I really like the way you put that, and
• 12:23 just using these dollars for, as you say, higher education, you know, for the tuition room books. I think that makes total sense. And you know, at the end of the day you must pay this money back, as you all have said a bunch of various times: do you want to pay it back because you took a spring break trip, or do you want to pay it back because you took
• 12:43 some extra classes you could graduate a little bit earlier. I mean what's going to make the most sense,
• 12:48 others debt isn't bad in and of itself. It's just the misuse of debt,
• 12:52 you know. We want to make sure that we're making smart decisions. You all are definitely on track with helping from that decision-making standpoint.
• 13:01 yeah, excellent.
Austin Deike
13:03 So from the I was just going to ask.
• 13:08 Austin is there like a rule of Thumb be up when somebody is wondering when and when not to take out loans. Or do you want to do that later?
• 13:17 Yeah, we can get a little bit into that more in the next episode when it comes to situations. And what should we do and like? We said at the beginning, Ah, nobody's. Nobody's situation is better than the others. And things can be different, but it all comes down to it. You get to make your own decisions. There are different situations for everybody, and there's different options. Um matter of fact, it is possible to pay for school completely with cash. You can
• 13:42 work your butt off, save a bunch of money, and you can pay it off completely in cash, or you can. There, there's plenty of options, I know Dan, Dan had a rule of thumb that he's heard before.
Daniel Hiebert
14:06 Yeah, absolutely a good segue, too. And this, again, is a rule of thumb, and sometimes rules of thumb can be referred to as rules of dumb. So, you must really make sure that you are using it wisely. But the rule of film that I've always kind of
• 14:25 and understood is that your total loan balance, when you graduate
• 14:33 should equal what you estimate for your first-year salary or compensation. So, if you expect to make after you graduate. Fifty thousand dollars, having a student loan balance of no more than fifty thousand.
• 14:49 Is that rule of thumb. Now, as you all are saying. You know every situation is different.
• 14:54 Maybe the best dollar amount is zero. But again, you know, you must just remember using your debt wisely and making good decisions with that like you say, if you're using it for to improve yourself and invest in yourself through education, I think that's a good investment. So, would it be worth borrowing? Absolutely.
Austin Deike
15:15 Yeah, I totally agree with that, Dan. And I really like when you say that it's an investment right? It's an investment in higher education. There's you,
• 15:23 you know it. It's just a tricky situation. When we talk about.
• 15:28 Well, we're at the Financial Planning Club. Right? We Look, we're futuristic. We look to the future. But I think a lot of people are not thinking that far ahead Um! And when they look at like when they're going to where they're going to go to school. They might look at these private universities. That tuition is sixty thousand dollars a year, and they might, you know, sign up, but jump into something too quickly, and then they realize, oh, okay, wait hold on, you know I don't really know what I want to do yet. And yet I'm spending tens of thousands of dollars that are going to take a lifetime to pay back.
• 15:54 And so I think that. Yeah, that that's a I mean, in my opinion, I feel like that's a good rule for them to go by when you're looking to pursue a higher education.
• 16:04 Yeah, and when you're looking at as like an investment
• 16:10 if you want to look towards the long-term, and your future, if you really want to spend some time on it. That can be very beneficial, because,
• 16:19 growing up, I think,
• 16:22 in high school, it was just expected that you go to college, and you can get pressured into going to college, even though that's maybe something you don't want to do, or you don't know you want to do, and that can lead to people taking out loans
• 16:40 and going down the road that they shouldn’t do or don't want to do. They just kind of fall into the pressure of everybody from my hometown, and all my friends are going to school, so I better do that. So yeah, if you want to look at it as an investment
• 16:56 to get to a higher paying job. Then that's awesome. But just you got to look towards the future more than just a short term. I'm going to do this because other people are doing it.
• 17:09 Yeah, I like what Aiden said. If you viewers don't know um, we are us to be our finance majors. Ah, financial planning majors, when we go to the Financial Planning Club and a cool, the cool word about that is planning. So, we're always. We are thinking futuristic, and I think that is a key word. There. You got to have a plan. It doesn't matter. I don't think it matters where you go,
• 17:29 what degree you get, or how much you take out. But I think you should have a plan. Say, if you're going into a profession that pays only fifty thousand dollars a year. It's probably not a good idea to go to a school and pay. Pick out a bunch of student loans for two hundred thousand dollars a year,
• 17:48 with the way interest works, and just that financial or that income shovel that you give. It's. Ah, that plan is impossible to pay that all back. Not impossible, but difficult. And it's going to be. It's going to be ah chaining you down for the second you get out of college. It's going to be a weight on your shoulders, and it's just going to be tough.
Austin Deike
18:13 hard because, as an eighteen-year-old or a nineteen-year-old, or whenever you're going to college. I don't know the average age, but you must make these decisions that are literally going to affect the rest of your life, or at least your financial life.
• 18:25 And so, when you're thinking about things like this, it's important, like Austin said. To really have that plan structured, even if it's, you know, loosely based around so and so. But just have something to reference to go back and look at it, because I think that I mean that is that will lead to success in the future. And just thinking about that is,
• 18:44 yeah, very important, because you are starting a step behind when you start with a lump sum that you're starting a little bit in the hole, so it's just a micromanage that whole
• 18:54 How big it is, and just have a plan. Understand? Understand what your what your degree is going to do for you understand? If it's going to get you into a specific profession and understand what that profession pays. So that way you don't go way over in your head in student loan debt, and you
• 19:10 end up graduating, and you don't have any idea of what your degree can get you. And where's to start?
• 19:18 Do you remember? Ah, at excel when I heard that statistic that only thirty to forty percent of people get a job within the Major. They studied it in college. I think it was less than that. Yeah, twenty or thirty percent or something like that. So that just goes to show that plans change.
• 19:38 But if you just got to do the best you can in the moment to figure out what you want to do
Daniel Hiebert
• 19:45 We've been clear. I think you know the exile at Charlie you mentioned to these guys were fortunate enough to go to a fantastic conference that had a lot of ah next Gen. Breakout sessions and workshops around the financial planner of the future.
• 20:03 So yeah, I had a great time. I know you all did, too, and definitely came away with some good learning.
Daniel Hiebert
20:14 Yeah, I like Aiden the how you put the plan together. So this is what we can maybe leave our listeners with, and then we'll pick it up next week on how student loans work. So maybe some of the more of the mechanics behind, how they work
• 20:32 and maybe some of the different types of and kinds of student loans. But I think the main takeaway that I've heard today is that having a plan in place is super important, and so, coming into each school year, have a plan where you're going to look at. How am I going to pay for my tuition coming up two
• 20:51 so like It's like Austin said.
• 20:53 Savings job.
• 20:56 Maybe hitting up your family and friends, whatever it is. So, get that savings and get that cash element. And then I would say, too, and you all have maybe mentioned this in some in passing, but honestly, I think an untapped
• 21:13 area that students just don't pay enough attention to our scholarships and grants. There's even in financial planning. There's like a dozen different scholarships and a lot of them go unused,
• 21:25 so I strongly encourage you to make sure that You're looking at nab jobs and some other places where there are scholarship opportunities. And yes, it's not going to be one hundred percent.
• 21:35 But you know again, if you're if it's part of your plan, maybe it's two thousand five hundred. Maybe it's three grand, you know, whatever it is that adds up.
• 21:44 And so then you can make as smart a choice as possible on making up the gap, and that would be through, student loans, or taking less classes up. I'm not sure. But I think the main point is to make sure that you have a plan, a thoughtful plan in place to make sure that you're not borrowing everything,
Daniel Hiebert
22:07debt anchor around your head when you graduate. So, what do you all think of that?
Austin Deike
22:14 Yeah, that was that was good. I'm going to actually Austin pointed out this lovely statistic. That shows something. Well, what you just mentioned. It says that a third of undergrad students, don't file for the FAFSA and of that third two million would have qualified for a grant.
Daniel Hiebert
22:29 There you go, so like you said, you know that's a huge amount of money that's just going unused and untapped. So that that's correct statistic. But we see that all the time, I mean, even at our own university
Austin Deike
22:45 there are several scholarships that are open to anybody There's obviously some that are major specific, or you must be pursuing a certain, you know, whatever.
• 22:55 Um. But yeah, definitely,
Daniel Hiebert
• 22:59 I'll tell you. I'll tell you good story, my nephew, Who's older than you guys now, but
• 23:04 he financed most of his education through scholarships and gifts. He went to every place in his hometown
• 23:16 he went to the Lions Club. He went to the Chamber of Commerce. He went to all these places, and he just said, Hey, I’m a college student. I'm going to,
• 23:24 You know. He went to South Dakota State University, and he said, I’m trying to finance my way. I've got some savings, but I could really use your health here, you know, and he just basically was able to scrabble together enough gifts, scholarships, and grants,
• 23:41 and he graduated with no debt whatsoever. So, thanks for bringing that up, and that's a great point. Make sure that you're taking advantage of some of this I’m going to call this free money.
• 23:53 Ah, it it's not free, but you know it's pretty Dane close, so you'll have to maybe fill out some applications, maybe do some interviews, um, and just meet some requirements along the way. But, man, you're just leaving money on the table. If you don't take advantage of some of those,
Austin Deike
24:10 and your kind of must ask the question, What's the worst that can happen? How can it hurt? And if I apply for this scholarship, you know. You write an essay or fill out an application for something, and you know the worst that can happen is,
Austin Deike
24:28 investing your time into a possible multi. You know a couple of thousand dollars that taken off your already expensive college. So, you just must look at it at the What's the worst that can happen. Kind of mindset, and you'll realize that
Daniel Hiebert
24:54 Yeah, and thanks very much. That's it,
• 24:57 Stewart. I don't know. Did you want to add something on their Aiden. I was just going to say, Yeah, I totally agree with you, Charlie
Austin Deike
25:04 I mean, it's interesting.
Daniel Hiebert
25:09 So it's a life approach to what's the worst that can happen All and a few thousand dollars may not seem like a lot at the time, or maybe it doesn't a grand scheme of things, but the interest accumulated on that those one thousand dollars for those three thousand dollars, or whatever it is alone, is, you know,
Austin Deike
25:25 worth your time of filling out an application and going for the scholarship, anyways.
• 25:29 Yeah, we can. We can get into it more in detail of what routes can you take to help nickel and dime, or college, and help, and where some schemes that you can use? But as an avid scholarship filler outer myself. Um, just make sure you're not sending out to your social security number. Run the opposite direction as fast as you can. I just want to throw that in there.
Daniel Hiebert
25:54 and I I’d say, too, and just kind of closing. You know this could be a great episode for us. I know Samantha Campbell is a great resource at the College of Business for scholarships and things along those lines, so we can get her on a podcast,
• 26:10 and have her talk a little bit more in depth on some of the resources that you know Minnesota State has. I know they do. So, they're not going to go on this alone. You're going to be able to have some resource firepower behind you. But let's kind of just close for today.
• 26:29 the main takeaway. And you all correct me if I’m wrong here. But the main takeaway is making sure that you're using debt wisely. Understand how the student loan works, and really, at that basic level, you're borrowing money, and you need to pay it back.
• 26:46 We make smart choices about as you come into each school year. How much are going to? Am I going to be able to pay in cash from savings for my job?
• 26:56 Maybe I've got some grants and scholarships that I can add in there, and then I’ll try and make up the balance in a student loan if you need help again. Minnesota State has some great resource to help you navigate through that whole complexity,
• 27:11 and I think what we'll do, maybe for next week, for the next episode is, let’s just maybe get in a little bit deeper into the mechanics of all these works, so that we have a so that listeners have a really good idea of how these things work. So, one hundred and fifty,
• 27:25 any parting.
• 27:29 Yeah, I just like to say to like the viewers. Obviously, Thanks for listening. But going into the next episode I’ll just figure out where you're at if that's zero dollars awesome. If that's one hundred thousand. That's okay to figure out where you're at. Figure out how much more you need to go.
Austin Deike
27:46 Figure out how much that will cost you, and figure out, what can we do to get that plan set in place.
• 27:52 Figure out where you're at. Look to the future and get a plan.
Daniel Hiebert
27:57Well said, Thanks, you all, thanks team for an excellent episode, and thanks everyone for listening more on this to come