How to Deal with Debt – Part 2

You’ve left college and now are facing a mountain of debt. This can be terrifying now. The good news is, as a Bible College graduate, your debts are less than those of your counterparts. I first started this blog for one Bible College in particular which costs  30% less than the state’s public university. So imagine you had 30% more debt for four years. Your theological education is looking a lot more affordable. Now, with a good attitude, there are many things you can do to help yourself become free of debt more quickly.

First Things First

First and foremost, as I said before, “Tithe. Give to missions. Be responsible”. God rewards faithfulness. My husband and I know this firsthand. For 37 years the Lord has cared for us and He will prove faithful to you too. Start giving. Do it now.

We married the week after graduation. We drew a line around our lifestyle and did not expand it no matter how much we earned. Don’t love the world or the things of it, because the love of the Father isn’t in them. Not only will you find that freeing, but you will get out of debt a lot faster. Frugality is an adventure you can enjoy. Learn to love Freecycle and Savers.

It is unlikely you will get your dream job just out of school and unhealthy if you did. We had our first paid position when we went to the mission field at age 31. While you are working to pay off your debts, whether you are in a paid church position or not you should be serving Jesus faithfully in ministry in a local church.

You might be thinking, “That’s not financial advice”. Yes, it is. It is biblical and sound financial advice. Now the nuts and bolts.

To Parents Who Are Reading This

A number of parents have asked me how they can help their children. If you own a home and your interest rate is lower than the rate of your children’s loans, you can pay off their loans and take a line of credit against your mortgage. Many students have unsubsidized loans at 6.8% and if you have a mortgage at 3.6% you will save your adult child thousands of dollars by helping them this way. This is not code for, “Stick mom and dad with the bill”. If you can do this and your adult offspring is responsible, then by all means do so. How you handle their repayment to you is a family matter but many people simply have their child pay the difference between the original mortgage payment and the increased amount.

For Everyone Else

Most of you will have parents like our son’s. His parents don’t own furniture made in this millennia. This means you must find other ways to pay down your debts. The first thing to know is to never default on your debt. It will ruin your credit for seven years and it is not ethical. As a Christian you have an obligation to repay the money you borrowed.

Pay off your highest bearing interest loans first. If you have any extra money at all, even if it were $5 over and above your regular payment, send it a separate check with a note that says, “This goes against the principal”. If you send in extra money the loan company will apply the extra to your next payment rather than the principle. Your goal is to pay down the principal as quickly as possible. Also be aware that your interest rate is usually discounted if you make automated payments.

Talk to your loan provider over any issue of concern. Your loan provider does not want you to default. They will work with you for income based repayment plans. Earlier this year I worked with a pastor who was paying almost 70% of his income to school loans. He is now paying closer to 20% of his take home and his interest rate has been reduced. Although he had asked for assistance in the past and been declined, he prayed and persisted. The loan company will not call you and say, “Hey, pay less, because we would so love that”. They need to be sure you are not shirking your responsibility. When they are confident of that, they will want to work with you to ensure you are able to make payments. It is in everyone’s interest for you to faithfully pay back all you borrowed.

If you must refinance or choose to consolidate, shop around for the best deals. Another useful link with good information can be found here. Be sure to deduct the interest you are paying on your taxes. This will save you money which you can apply against another loan payment.

This link discusses a number of options. One creative option is doing work from home where they company directly pays your loan provider. You can chip away at those loans even when you are looking for work by working online to have them paid directly. If you are not great a budgeting, this might be a wise choice for you.

Lastly, it takes a life of faith to live a life of faith. Every generation has challenges and yours is no exception. A friend of mine says, “If you are not living on the edge, you are taking up too much room”. Work. Sacrifice. Go the extra mile. All those Biblical things you have studied. “Give and it will be given to you, pressed down, shaken together, and running over.” (Luke 6:38) There is no greater waste than if you live life worried about your finances, dissatisfied with your blessings and disengaged from serving the cause of Jesus Christ. God made you for better things.

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How to Deal with College Debt – Part 1

The best scenario for those facing college debt is to start dealing with it the moment you take your first loan. If you have graduated and are now trying to decide if it is possible to pay off your loans, while continuing to eat and live indoors, do not panic. There is a way forward. But we’ll start with those who still are in school and can make choices to reduce debt load now.

First and foremost: tithe. Give your tithe and offerings. Tithe off your gross, not your net. Yes, that sounds painful and will feel that way when you start but you will be amazed how God is faithful to bless you. One of the ways to tie up this generation is to be sure they are so self-focused on their personal debt they do not give sacrificially. God honors His Word and He actually will do miraculous things to ensure you meet your obligations if you are responsible. Responsibility means tithing, giving to missions, paying your college and even chipping in for gas when you borrow a car or ask for a ride to work.

Next, fill out the FAFSA using your best “guesstimate” from the previous year and do that at the start of January. When you fill out your taxes go back in and use the “Data Retrieval Tool” which is a box you will check that downloads your filed return into FAFSA. It is to your advantage to fill out the FAFSA early. Just be certain you update and finalize it when your taxes are complete.

Do your “loan homework”. There are resources from little known scholarships, to crowd-source donation websites that can help reduce what you borrow. I will not recommend any particular site but you can find them with a search engine. Do some “smart shopping” to avoid high interest rates. When you do take loans, take the least amount you need at the lowest rate possible. Do not borrow extra money for living expenses beyond room and board. “Board” means meals. Though few Bible colleges are known for extraordinary meals, you paid for those meals so better to eat them then go to Chipotle. Never borrow more than you absolutely must. Trust God and get job to pay for extras or go without. It is good practice for life after school.

Remember that 1098 Form Brother Ed sends you every year? Keep it. It is vital to your financial well-being. Use that to be sure you or your parents take the American Opportunity Tax Credit. Unless you are a higher wage earner, that credit, which ends in December 2017, will be the most advantageous tax credit going to cut down on debt and pay your bills. It is possible to receive up to $2500 per year per student. If you or your family have not taken this credit when you were eligible you can get the money back retroactively by filing an amendment.  The credit can only be taken for four years and is worth $1000 even if you have no taxable income. Would four to ten grand make your life easier? If the answer is yes, ask about this credit.

Take some classes online. Your college probably offers online courses, or you may be able to transfer in credits from a community college. These courses are less expensive and decrease your indebtedness.   Look at ways to shave a semester off your time in school. A bit here and there saves the cost of room and board which is a significant expense. If you want to help your school by spending more time there, consider saving the money and donating it to the school instead.  If you are attending Bible college a large portion of your tuition is covered by donations raised by the school president who is constantly traveling about the country and raising funds so you can get an education.  If you are going to remember someone special at Christmas, drop him a  card.  In fact, thank the entire staff. They are earning less than you think so you can prepare for ministry.  In doing so they are helping to pay for your education.

If you are a senior or have graduated, be of good cheer. Having walked through this with other graduates there is indeed hope. I will post on debt reduction strategies for the graduate tomorrow.

Remember this regarding that mountain of debt: faith and faithfulness will ensure it does not stand in your way.