Student loans and your responsible career series - Part 1
When coaching students and working professionals who want to pursue a responsible career, I have heard them again and again expressing a huge fear: Many believe that the salary they can draw from making a positive social and/or environmental impact will not be sufficient to meet their financial goals.
This fear usually revolves around how to pay their student loans back. This fear is further exacerbated by the recent stories of young professionals that, for some reason, only seem to realize post-graduation that they have signed loan papers that gave them money that they have to pay back with interest. For instance, the New York Times recently published a story centered about Cortney Munna, a recent graduate from New York University (NYU) with around $100,000. The story sparked a debate about who should be held responsible for allowing Ms. Munna (and her mother) to take on so much debt without evidence that Ms. Munna and her mom understood what they were getting into in terms of monthly payments and length of repayment post-graduation. Was it the responsibility of NYU to tell this student that the burden of debt in her case would be so large that she might be better off considering transferring to another (and cheaper) institution?
In this new series, I will focus on how to best manage your loan decisions so that you can minimize the impact of your loans on your responsible career decisions. I have coached a number of professionals who successfully prevented themselves from pursuing the career they wanted because of their financial obligations. I do believe that leading a responsible financial life is central to self-managment and career management.
My first post in this series will focus on students who are currently deciding whether they should take on additional loans to finish their education. Here are two strategies that offer alternatives that might enable you to learn from Ms. Munna's story and avoid taking on student loans. The lower your loans, the more responsible career options you will have post-graduation:
Responsible career strategy #1: Use loans as your last possible option - Instead of taking out loans, could you take a part-time job? I worked an average of 20 hours throughout the school year and about 40-60 hours a week during all the school breaks to pay for my tuition and living expenses while in college. Odd jobs I did to pay for my college education included cashier at a supermarket, summer custodian at my high school, barista at a coffee shop, and night counselor in a drug addiction center. Each of these jobs enabled me to make ends meet and pay for tuition.
They also allowed me to get exposure to a number of possible careers choices. In the case of Ms. Munna, an aspiring photographer who immersed herself in a liberal arts education, she could have leveraged her research and writing skills to build her visibility as a photographer on sites such as e-lance.com. She built her individualized degree at NYU, which is commendable. Through her education, she surely has come across a number of professors, classmates and university staff members that could have enabled her to secure contracts for evening and weekend events. In addition, by looking at the NYU alumni database, she might have identified a few established photographers she could have met with and who might have provided her with best practices she could have used to get started as a photographer in New York City. Small contracts as a student would not only have provided her with extra income but would also have helped Ms Munna explore how difficult free lance photography is as a career. Most importantly, this side business would have enabled her to build her portfolio and resume, as well as gain a valuable network of contacts she could leverage during and after her college career. Think creatively about what you can do to make it work financially.
Being industrious about money while in college has some valuable side effects beyond leading to lower loans. First, by becoming more self-reliant, your self-confidence and ability to articulate what you want will increase as well. Second, any employer is looking for candidates that have a track record of tenacity and industriousness. I cannot image a better set of examples than mentioning how you paid your way through school to demonstrate these skills to employers through your resume and in future interviews.
Responsible career strategy #2: Think things through before you sign - If you sign any kind of contract, you must know what the consequences of the commitment you are making by signing that contract are. Remember that everyone but you is benefiting from the loan being processed: The university receives your tuition, and the loan officer receives a commission no matter whether you pay your loans back or not. In sum, it is really not in their best interest to educate you more about your student loans. Therefore, it is you as a student and responsible adult that needs to apply the counting skills you learned in middle and high school to figure out what these loans will cost you while in college and after.
In the case of Ms. Munna, before signing to take on an additional $20,000 in loans, she could have taken an hour or two using one of hundreds of student loan calculators available online to understand that adding $20,000 to your students loans at 4% (+ 1% of loan fee) payable in 10 years would mean that you owe will owe $204.54 every month for the next 10 years. Such online resources include www.finaid.org or a number of student loan repayment programs offered through Federal Agencies as well as private lenders. If you are thinking about getting student loans, remember that no one but yourself is responsible for deciding whether to take on this loan or not. Therefore, make sure to take the time to read all the conditions of your loan (big and fine print) before you sign (or co-sign) any loan agreement.
I hope that these tips will enable current college students to plan for their next year in college in a way that will minimize the loans they will take out. In my next post, I will provide strategies that aim at helping those of you who already have taken out loans and are wondering what you can do now to reduce your payments or even, in some situations, have part of your loans forgiven! Student loans are tough to bear, but they do not make it impossible for you to pursue a responsible career that successfully blends financial return with social impact and environmental responsibility.