Balancing budgets: Students reconcile debt, savings

By Lauren Wilson / Staff Writer

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Casey Rose was part of the 69 percent of Pitt graduates who left Pitt with degrees and debt in 2013. When he left Pitt and started his first full-time job as a manager trainee at a car rental company, his only savings were in an emergency fund he had saved up with the help of his parents.

Early savings can reduce the burden of student debt. The average payback of student loans takes 10 years, according to the Consumer Financial Protection Bureau. The average debt for a Pitt graduate in 2013 was $34,623, according to a report by the Project on Student Debt. On a national level, the Consumer Financial Protection Bureau estimates that college debt was worth $1.2 trillion.

To reconcile with these figures and pay off either impending or real debt, students and recent graduates must find a way to set aside money.

Setting goals and carefully planning are the keys to saving, according to Jay Sukits, who teaches a personal financial planning course. Don’t allow debts to build up right out of college, Sukits said. 

In his course, students set personal finance goals for one year, three years and five years in the future. The goals become more general reaching the five-year horizon. The very first savings goal is one Rose has already achieved.

“Put money into an emergency fund,” Sukits said. 

Beyond that, Rose, who now sells insurance at State Farm and makes about $30,000 per year, which is about what he made at his first job, said he currently doesn’t have any long-term financial goals except to continue working. 

Rose was able to save up his emergency fund, he said, because he limited unnecessary costs when he was in school.

“[In college] it was about paying the bills. But I didn’t save for anything more long-term for after school,” Rose said. 

Though he wasn’t saving for the future, Rose paid his bills and built his emergency fund by limiting his spending at bars while in college. Study Breaks College Media surveyed more than 500 college students and found that 70 percent spend money at bars each month. 

“If I was going to do a night out, I’d take out maybe $30. I’d leave my card at home,” Rose said. “I know too many people that have been surprised with a $150 tab the day after [going out].” 

Students looking for immediate savings can do so by keeping record of expenses, according to Sukits.  

“Make a list of your bills,” Sukits said. “See where you’re spending your money and eliminate everything that is unnecessary.” 

A full-time hourly wage makes it easier to put away cash, Rose said. Since graduation, he has started saving between $10 and $20 a week. At this rate, and assuming Rose left Pitt with the average $34,623 in debt, he would be debt-free in a little more than 33 years. 

Eliminating debt early helps savings down the road. In an unsure job market, a paycheck from the first job out of college will not guarantee financial security. In 2013, a Bankrate survey found that 76 percent of Americans were living paycheck-to-paycheck with very little savings. Many recent college graduates exit the University, Sukits has found, without financial goals. The average overall starting salary for college graduates was $45,473 in 2014, according to the National Association of Colleges and Employers. 

“They think, ‘I have a job, I have money, now I’m gonna spend it.’ That is a bad approach that invariably is going to get them in trouble.” Sukits said. “You never get ahead of the game when you’re in that situation.” 

In a study called “Money Matters on Campus,” EverFi surveyed 40,000 first year college students and found that 80 percent of students were stressed about debt. For current students who worry about paying student loans after graduation, Sukits recommends immediate payoffs as a part of the first-year stage of the plan.

Nationwide Insurance gathered data and found that average student income, through a combination of part-time jobs and parental assistance, is about $1,200 per month. The College Board found that the average non-tuition nine-month expenses for a college student are $17,410, and the lower budget average is $11,660. Loans are often necessary for simple living expenses because of the low income of the typical college student. Saving is not an easy task, and it means skipping out on expenses and buying only necessities.

To jump the gun on paying off her debt, India Hunter, an exercise science major at Pitt, works two jobs. Hunter is one of the 71 percent of college undergraduates with a job, according to statistics from the 2011 U.S. Census. 

She works at the Pitt University Store and at Rivers Club Athletics, a fitness center Downtown, to pay tuition, rent and utilities.

“It can be stressful at times, but it’s a nice feeling knowing I can do it myself,” Hunter said. 

Set to graduate in 2015, Hunter is considering her financial future. She saves about $50 a week, she said, hoping to pay off her substantial student loans from a five-year program as soon as possible. She also keeps a record of her expenses. 

“I document every rent check, every utility bill in my name and keep track of other spending such as school supplies, textbooks, clothing purchases,” Hunter said.

Whether or not students are saving, most consider it important. A 21st Century Insurance study found that 92 of 100 students surveyed say saving money in college should be a priority.

With long-term goals such as buying a car, taking trips and paying off student loans, Hunter’s finances rely heavily on saving as much as possible. 

“[Warren Buffett] said ‘Do not save what is left after spending. Spend what is left after saving,’” Hunter said. “That’s what I try to do.”

A 2008 Sallie Mae study found that 84 percent of college students reported that they needed more financial management education. The students surveyed reported that general money management, including budgeting, was a topic that interested them. 

Sukits’ efforts are helping to fill this knowledge gap.

Matt Swan, a Pitt finance major and a junior in Sukits’ corporate finance class, does not yet have a personal budget but says he will prepare one as part of the course’s curriculum later this semester.

Swan has a work study job at JumpStart, an early childhood development program and part of PittServes. According to Swan, the work-study job program has been useful for his finances. 

“It’s also convenient for students to be able to get a specific amount of income throughout the year without having to work too many part-time hours,” Swan said. 

Swan normally prefers to save most of his income, especially because of student loans.

“My plan after college is just to try and pay off my loans as quickly as possible, because I cannot stand the stress of debt,” Swan said in an email. “Whether or not that all works out, I’ll have to see.”

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