This post was contributed by a community member. The views expressed here are the author's own.

Health & Fitness

CCCS ADVISES RECENT GRADUATES: "Wise Financial Decisions Now Can Save You Money Later"

This CCCS article uses the experiences of a recent college graduate to show why students need to gain financial awareness and explores the money management skills they will need to succeed.

Nicole entered college with a dream: More than anything, she wanted to become a family physician so she could provide people in the community with affordable health care.  During high school she had enjoyed her science classes, and her mother, who was a nurse, had encouraged her to volunteer summers at a local Veterans Administration nursing home.  These experiences helped her recognize that medicine was the right profession for her and left her with a strong desire to give back.  While Nicole knew what she wanted to do, she didn’t start college with much personal finance knowledge.  How much money moxy did she have? “Almost zero,” she says, but over time she has become increasingly aware of how financial literacy and skills affect a person’s opportunities and long-range economic security. “It’s taken time, but my struggles over the past few years have made it clear how important financial skills really are,” she notes.

Nicole’s experience mirrors that of many recent high school graduates.  In T. Rowe Price’s 2013 Parents, Kids, and Money Survey, a majority of teens polled felt that good education and hard work are important to their future, but only one-third said that financial knowledge will play a major role in their success.  This lack of financial awareness may be due to many factors:  Parents sometimes don’t have the time or knowledge to teach their children about personal finance.  Students who haven’t lived on their own may also lack a practical sense of how finance fits into their lives.  In a recent Capital One Back-to-School survey, 93 percent of the teens interviewed said they were not involved in paying household bills or managing the household budget; 46 percent didn’t know how to create a budget. 

“Budgeting is one skill we all need to learn, because it serves as the foundation for everything else,” notes Nina Heck, Director of Counseling and Client Management at local nonprofit Consumer Credit Counseling Service of Maryland and Delaware (CCCS).  “Students who leave home without this knowledge are at a distinct disadvantage. They’re forced to make financial decisions on a wing and a prayer.  Because there’s no check and balance, they’re more likely to overspend.  They also may sign up for student loans without realizing the commitment involved or how much they can afford.” 

Find out what's happening in Westminsterwith free, real-time updates from Patch.

Heck recommends that parents sit down with their children and hammer out a budget early on.  “As soon as young adults have money of their own, it’s time to teach them how to manage it. CCCS has an interactive budget tool on its website that can help in this process or you or your child can even call us for a free, confidential budget counseling appointment.  Once a budget is in place, encourage your child to revisit it often.  If you’re contributing to your student’s education, don’t be afraid to offer guidelines or set limits.  Remind students that if they regularly spend money going out with friends, there may not be any left when it comes time to buy textbooks.”

Nicole says that wise credit use is another skill students need to learn.  “That’s one area where I ran into trouble for awhile,” she admits. “When I was an undergraduate, I used my credit card to buy things -- like dresses to wear to parties.  I didn’t think about the amount I was charging.  I just thought ‘I’ll pay it off one day.’  But that was easier said than done.  As time went on, I realized you have to think in terms of wants and needs before making a purchase.  Impulsive shopping can be dangerous.”

Find out what's happening in Westminsterwith free, real-time updates from Patch.

Heck agrees. “It’s important for students to learn that credit isn’t free -- whether they’re using a parent co-signed credit card or one in their own name.  If it’s clear your child is overspending that first semester at school, call a family discussion.  Review how credit works and the responsibilities that are involved.  Also explain why it’s important to pay more than the minimum monthly balance and that any amount charged on a credit card must be factored into his or her budget and repaid.”  CCCS’s online “Understanding Credit Reports and Credit Scores” course helps young adults learn about how credit works.  It’s free, interactive, and self paced.

During Nicole’s undergraduate study at University of Georgia, she paid for college with a Hope Scholarship and help from a mentor. When she graduated and moved to Dominica for her first two years of medical school, she no longer had enough financial resources to cover school and living expenses, so she took out her first student loan. In time her need grew, and at the point she completed her medical education, she owed approximately $275,000 on three student loans.  During most of her residency, the loans were in deferment, but as they came due she struggled to afford the loan payments.  When Sallie Mae recommended she talk with a credit counselor, she called and made an appointment with CCCS.

“My counselor at CCCS helped me a lot,” she says.  “She was hard working and caring.  She helped me look at ways to deal with what I owed.  She took the time to show me how CCCS’s debt management program works.  Being in the program has made it possible for me to afford to repay my student loans and still have money left to live on.”

Heck says, “CCCS sees more college graduates than ever who are struggling to repay student loan debt.  Before enrolling at a school, it makes sense to look at what you hope to achieve.  In some cases community college or working may be the best option.  Going to college just to be out on your own is a poor reason and very costly.” 

Heck also recommends checking for scholarships and grants before locking into a student loan.  “Look online and inquire about funding opportunities that may be available through your school or community.  If you decide a student loan is the only available choice, make sure you understand what’s involved before signing the loan contract.  If you’re a parent, also do your homework.  Take the time to review student loan documents and think twice about cosigning.  If for any reason your child is unable to repay what’s owed, cosigning leaves you fully liable for the balance, and student loans generally can’t be discharged through bankruptcy.”

Life after college can be a challenge for graduates who don’t find work that pays enough to cover their loans.  Fortunately for Nicole, about three months after she completed her medical education and residency, she found a job doing what she loves.  Today she works with two doctors in a rural family practice and hopes to qualify for forgiveness on some of her student loan debt by serving those in need in her community.  “Being in this much debt feels heavy at times,” she admits, “but I’m doing what I can. Paying off what I owe will help me increase my credit score.  That’s a worthy goal.” 

Looking back, Nicole offers this parting advice to students who are college bound: “Start with scholarships and grants -- many go unused each year.  When it comes to student loans, figure out exactly how much you’ll need for essentials and apply accordingly.  If you end up with more money than you need, don’t spend it.  Give it back.  Later you’ll be glad you did!”

CCCS of MD & DE offers budget and credit counseling at its local offices and by phone.  To make an appointment, call 1-800-642-2227.  On its website, it also provides free, e-Learning courses on many financial topics including how to afford college and how to manage student loans.  Visit www.cccs-inc.org to learn more.

####

Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01 

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?