Some help from the Center for Financial Wellness: Managing Student Loans in Real Life
If you’re thinking of taking out student loans, it’s probably best to get familiar with your options and how they really work. Finances can be stressful, but the UC Berkeley Center for Financial Wellness (CFW) can help you get acquainted with your options.
To offer some practical guidance, we connected with three professionals who work closely with students on financial wellness and aid: Jadyn Stafford, a senior coach of three years for the Center for Financial Wellness; Angely Miranda, Senior Director of Youth Leadership & Financial Capability; and Jennifer Towers, Assistant Director with the Financial Aid and Scholarships Office.
Together, they represent a wellspring of good habits and critical financial understanding. Let’s ask them some questions!
Practical takeaways
What is one action students should do right now?
Jennifer: “Schedule an appointment with the Center for Financial Wellness.”
Jadyn: “If you have loans, use the loan simulator on studentaid.gov.”
Angie: “Use your grace period to plan for loan repayment. Know what your repayment options are and what forgiveness programs you may be eligible for.”
What is one myth to ignore about loans?
Jennifer: “That everyone should avoid borrowing student loans.”
Jadyn: “That it’s better to go without your basic or school needs than take out student loans.”
Angie: “That student loan debt will never go away. It’s very possible to pay off your student loan debt, though it takes time and knowing what repayment plans and forgiveness programs can help you achieve that.”
What is one shift in mindset you can offer students thinking of loans?
Jennifer: “Think of loans as a financial tool, not a personal failure.”
Jadyn: “Student loans are an investment in yourself.”
Angie: “Don’t avoid your student loan debt no matter how high it is.”
Before you borrow…
What should a student think about before taking out a loan?
Jennifer: “’Loans are terrible, avoid them!’ This is a perspective I hear from students and families often. As a first-generation immigrant, first-generation college student, and someone who grew up in a low-income household, I had scholarships and grants, but that wasn’t enough to cover my expenses. I needed to borrow loans to complete my bachelor’s degree and again to complete my master’s degree. I invite you to think of loans as a means to complete your education, and as an investment in your future. It is important to be cautious of loan borrowing, but that is why you enter the process informed and with intent.
- Attend advising sessions and review information on the financial aid website.
- Make an appointment with a Center for Financial Wellness coach to learn about the process and your options.
- Borrow only what you need. If you have borrowed all of your federal student loans or are ineligible for federal student loans, private student loans can help fill that gap. The financial aid website has an entire page about the private loan borrowing process and even provides a preferred lender list.
Loans are there as a feasible option. Be an informed borrower.”
Angie: “Borrow wisely. You don’t need to say yes to all the loans they offer you. Know and understand how much you’re borrowing, this includes interest, and when repayment starts. Save money while you are in school to help you make your first payment.”
You have seen the repayment process up close. Is there anything you’d like to share about navigating borrowing and repayment?
Jennifer: “You have to advocate for yourself and you have to be informed so that you make the best decisions for your circumstances. My loan journey was an active and, at times, confusing and challenging journey. Student loans were the first loans I ever borrowed and I did not go into the process informed. My parents didn’t know what to do, I didn’t seek guidance from my financial aid office, and we certainly didn’t have a financial wellness center. I entered the repayment process after completing graduate school. I had a job but it wasn’t great, and that reflected in my salary. With rent, bills, and other expenses, there was no way I would be able to pull off the default repayment plan. So I did some research, I looked up the different options on the Department of Education website, I called my servicer, and ended up consolidating my loans and signing up for an income-based plan that resulted in a manageable $50 monthly payment. This was something I had to update annually based on my repayment terms.
Fast forward many years later, the Public Service Loan Forgiveness program was introduced. I was back online researching my eligibility, calling my servicer, and filling out and submitting paperwork. I had worked years at a few different community colleges; my payments had been on time. From what I read and later had verified by my servicer, I would qualify for this program. When I heard back from the Department of Education, they said I did not meet the criteria. Rather than take their word, I called, spoke to several reps, resubmitted my paperwork, and was approved. Their initial decision was an error and the loans I had been paying for years, without seemingly making a dent, would be forgiven. Going through this process, you won’t have people checking up on you or walking you through the steps needed to pick out the right plan and learn about the different options.”
What repayment options do students often misunderstand?
Angie: “Student loans repayment options are going to change. Staying on top of the changes will be important. Know that you’ll be placed on the standard repayment plan if you don’t choose a repayment plan on your own. The standard repayment plan is not always the best option. In the state of California, you have rights as a student loan borrower. Know what your rights are.”
How do you build a realistic budget that includes loan repayment while maintaining financial stability?
Jennifer: “You always have to reassess. New, recurring expenses will arise, but your salary may not always increase as much as you’d like. At the end of my loan repayment journey, I was paying close to $2000 a month to continue qualifying for Public Service Loan Forgiveness (PSLF). The payment hurt. I had to constantly reassess my other bills and adjust my spending habits by searching for affordable and less expensive options. This was worth it to me because I knew I didn’t have much longer of a wait before those payments would cease altogether.”
Should I pay off loans first or start investing?
Angie: “This is a personal choice; if you have the means to save and invest, definitely go for it. If not, you can focus on budgeting to ensure you can meet your needs and pay your bills without stress.”
Jennifer: “Once I had a child, I immediately opened up a college savings plan for her. But because of my existing debt, I started off small and chose an aggressive portfolio. Every time a large debt was paid off, I would redirect my payments to her plan. Then I started an investment portfolio of my own.”
Jadyn: “Start small. If you have consumer (credit card debt) with an interest rate around 20% (compounding), you may consider how much you would pay in interest if you used money to invest with around an 8% return that could be allocated towards debt management. However, if interest rates are comparable (Undergraduate Borrowers 6.39%, Graduate or Professional Borrowers 7.94%) then this is up to your preferences.
Investment is not a guaranteed return; the return of 8% is the average. You should understand the risks of investment, but also that the interest you earn investing compounds.”
The more you know
Before you go, we have a couple more tips for you from the CFW Financial Wellness Coaches:
“Budget tip: Remember that budgets are tools meant to help you build your finances around your life and future goals, not tools to constrain or hurt you. Budgeting does not have to be scary. It is not about being perfect, but about being consistent and paying yourself first, even if it is just a small amount. The Center for Financial Wellness offers free one-on-one appointments to help you build a budget that works for you.” — Rafael Villasenor, Class of 2026, Senior Financial Wellness Coach with CFW
“If you have multiple credit cards, you can change the due date of all of them to the first of every month (or another specific date of every month), which makes it easy to manage.” — Angela Li
“One thing I do is I follow the 7-day rule which is essentially a “cooling off” period where I wait 7 days before I make a purchase which is not a need. This delay helps distinguish needs from impulse wants and will prevent me from making unnecessary purchases.” — Jay Shah
“A fun one I’ve seen people do is ‘matching; any fun expenses for necessary ones, e.g., if you spend $7 on a coffee, you save $7 for necessary expenses. That way, you can budget for important expenses while still having some more fun purchases!” — Daniel Chu
Hopefully, all that gets you comfortable in the saddle for the trail of student loans. It can be a little rocky, but so long as you keep your wits about you, advocate for yourself, and make use of the resources around you, you can get on just fine. The most unnerving part about it all is just the unknowns, but with the above insight and a discerning eye, you can light your own way and make the right, informed choices for you.
Vincent Vidana, Class of 2026, is majoring in English.
Want more?
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