#46 How to Recession Proof Your College Bound Journey Transcript
THIS IS AN AUTOMATED TRANSCRIPT… PLEASE FORGIVE THE TYPOS & GRAMMAR! xo-Lisa
Beatrice Schultz 0:00
If COVID making it so that this is not a good year for your student to go to school or the recession just feels like we just don’t have enough money for the whole thing, then it’s okay to reset the plan, but it’s not okay to just let it ride and use the past excuse to get yourself in financial difficulties? Well, I think what both of you are saying it’s mindset, it’s about being the captain of your own ship. Because if you begin with the end in mind, and I think Lisa, what you were suggesting is look, people with a degree a post high school degree, whether that’s associates, whether that’s apprenticeship or something in the trades, whether that’s a bachelor’s or a master’s degree, they still continue to make more money in their working lifetime than those that don’t. So we start there.
Lisa Marker Robbins 0:48
Are we enter recession? Are we not? I’m not a financial expert. And, frankly, I’m unsure. What I do know is stock market fluctuations hits to 529, savings accounts, inflation, and more are affecting the college bound families I work with. As a mom, I know exactly what it feels like to navigate those pieces while paying for college and knowing the future is uncertain. Recently, as I sat on a beach on vacation with two dear friends, a certified financial planner, and a registered investment advisor, we found ourselves sharing how we’re advising the families we work with, who have college bound students, I wished we were able to hit record right then. But instead, we decided to record after vacation. So today, we bring you thoughts from the beach on how to recession proof your family’s college bound journey. I’m Lisa marker Robbins, and I want to welcome you to College and Career Clarity, a flourish coaching production, I cannot wait for you to meet my friends. This is a really special episode today. I have two dear friends of mine with me and we were recently actually vacationing together. However, we all work in the space of helping college bound families supporting them in slightly different ways. But we all bring to the work that we do the heart to help families. So it’s my pleasure to welcome Beatrice Schultz, she is with West base college planning. She is a certified financial planner. And I’ve got Beth Walker with us. She is with the Center for college solutions. She is the author of never pay retail for college, and a registered investment advisor. And we are here to talk about how to recession proof your college bound journey which we’re such geeks, we thought that was a fantastic topic while we were sitting on the beach together. Welcome ladies.
Beatrice Schultz 3:08
Thanks for having me. This is fun.
Lisa Marker Robbins 3:10
This is really fun. Yeah. So I guess that says a lot about us if our vacation is sitting on the beach together, and talking about how we are advising families to recession proof the college bound journey. I think that says a lot about us.
Beatrice Schultz 3:23
Lisa Marker Robbins 3:24
So I’m sitting here, and we’re really kind of doing a recap, but we’re gonna expand on what we were talking about on the beach that day. But I’m sitting here working with families on identifying for college planning that right college major that future career for their students so that they can launch, figuring out what comes after graduation. And I don’t wear that financial hat. But my clients are certainly concerned with the financial piece. And so I start with, are we in a recession? And what is the climate right now?
Beth Walker 3:58
Beatrice you want to tackle that?
Beatrice Schultz 4:00
I think it really depends on who you’re listening to. Are we on our way to a recession? Are we in a recession, we had some recovery of the formal measuring keys, like what’s happening with stock market, you’ve got interest rates are still going up as the Feds trying to manage inflation. So we’re in a financial quandary, call it recession, calling what we want it we’ll see what that calls it. But the really important part for all of everybody is when you’re thinking about this college journey, any plan and it needs to be recession proof either way, because we don’t know what’s going to have between one or two or three year all of your kids going to college. So you do want to have a plan and we need to be able to get through it, which means we need to know where all the money’s gonna come from. What would you say about recession, Beth?
Beth Walker 4:46
Well, the definition of a recession is when your neighbor is hurting financially, the definition of a depression is when you’re hurting financially. So what’s interesting about where we are I think in the economy is, everybody’s feeling uncomfortable, because when they go to fill up the tank, or they go to the grocery store, things are more expensive. And the Federal Reserve, they were a little slow in terms of reacting, they didn’t think this was going to stick around. And what they’ve learned is Oh, yeah, things are a lot more expensive. We we’ve come out of a historic period of really inexpensive money. From a lending perspective, mortgage rates were at all time lows, it was easy to get a loan, it didn’t cost you a lot. And now, everywhere you turn, things cost more including capital. So we’ve even seen that in the student loan rates and the Parent PLUS loan rates when you bring it back to college, regardless of how they want to define it. I think everybody understands that the rules of the game have changed. And because of that, it gives us pause. I’ve never had as many clients really question Am I on track for retirement? Can I retire on the timeline that I wanted to it’s like, all of a sudden, coming out of the pandemic, and the last 10 years where we’ve seen really positive rates of return in the stock market. And now we’re seeing the opposite. So it’s really causing people to pause and reevaluate. Some of that is really healthy. But to your point, Beatrice, if you truly have a plan, this doesn’t catch you off guard. You know that markets operate in cycles, you expect there to be downturns. So there should be a strategy in place for something like this. Now, there are some things about this particular market that are unprecedented in terms of bonds being down when stocks are down. So as it relates to college, I think the biggest wake up call for parents who have 529 plans is, hey, wait a minute, I have my money in this age base plan. So the closer they get to college, this should be safer. But all the Safe Money has gotten hammered. And so people are just they don’t know what to do. They don’t know how to think about it. And that’s where I think we can really help.
Lisa Marker Robbins 7:15
Yeah, it makes me think of my youngest to graduated as Beth did yours. And May of 2020, we were that our kids were graduating from high school that year, and I had had an appropriately funded 529. And when I looked at it at graduation, I had lost what was equivalent to an entire year’s worth of tuition. And then when I went back to it in August to pay the first tuition bill, it had it had come back, which we know that like it will always come back. But some of us were on a shorter timeline. And at that point, I just moved it into a mutual fund so that it was no longer invested, it wasn’t at risk.
Beth Walker 7:57
Do you mean money market or money market?
Lisa Marker Robbins 8:00
I’m Sorry, money market. See, I’m proving that I know nothing about finances, right? Yes.
Beatrice Schultz 8:06
Well, you obviously do, because you did that. You said to yourself, Wow, what a dramatic shift from May to August, these kids are getting ready to go to school. So I’m going to take the risk off the table and just park it over here in a place where I’m not going to have that drama.
Lisa Marker Robbins 8:22
Okay. I know, I know a tiny little bit that I did. I just was like, because I think this is what everybody’s feeling right now. And here I am, you know, I’m nearing the end of paying for college. But the clients that we serve are not. And so yes, I took the risk off the table, knowing that I didn’t know what tomorrow would bring because this was just the beginning of COVID. And I think our families that we’re serving are feeling the same way. I don’t know what tomorrow’s gonna bring.
Beth Walker 8:49
Beatrice Schultz 8:50
Well, I think that’s true. And I think Lisa, you had an awkwardly. I mean, that was a really awkward stock correction or market correction that we just went down for one month, literally the month of March, when COVID hit and recovered within months. I think those same families today, it’s not recovering the way that yours did. And so it’s uncomfortable. They’re asking, “What should I do?” And if they’ve got more kids and they’ve got other money, then it may be hate time that arrived. But if you have kids that are freshmen, sophomore juniors, you want to pull some of the money off the table. But like Beth said, we’re in this awkward place where fixed income bonds are down the same time it’s dark. So there’s certainly concern for families. But I don’t want everyone to walk off this podcast and say, I better take all my money off the table now because we don’t want to have to capture more of those losses than we need to get that money is going to be available for college. So I’ll just say that the timing worked out okay for you, Lisa. But it’s usually I wouldn’t recommend only taking the money off the table when the kids start school. We want to start taking it off earlier.
Lisa Marker Robbins 9:54
Yeah. Is he that’s where I’m like that worked at that time. And I think I leave not From the financial side, but I’m going to start with on the college major and career coaching planning that I do with these teens and young adults, the first thing that I’m going to say to a family is, and then it’s also about the plan. But on the financial plan, the people who fare better and a recession, or in a down economy are those that hold degrees, they have lower unemployment. during a downturn in the economy. We don’t know ever what’s going to happen, right? Our whole lives, nothing’s assured. So don’t suddenly go, well, we can’t go to college, or that’s now that’s not the right thing to do. You’re going to fare better long term. Now, I don’t believe colleges for everybody. Everybody knows, my boy twin went straight into the trades. And he’s doing very well. All my regular listeners know that I guess. But stick with the college bound journey. But let’s figure it out. Because lifetime earnings of those with a bachelor’s degree, compared to those with a high school diploma is over a million dollars in their lifetime of additional earnings. And they’re going to fare better when the economy’s not good. So don’t suddenly decide not to go to college would be my first
Beatrice Schultz 11:13
piece of advice. And I think you say you’re not part of the financial solution. But of course you are. It’s like you also as a family, you want to make sure your kids graduate in four years. So it’s like, oh, we’ll start but we’re not sure are we going to have enough money for all four years, all of that even discussion is horrible. And I’m going to even argue, yes, it’s a bummer that your kids didn’t graduate and they had a COVID graduation and that the parents feel like many kids didn’t get the experience they wanted. Or they went to college, and they are living at home and paying these high tuitions, it’s okay, to take a gap year, it’s okay to go to community college and get some of these courses while you’re living at home and still get that four year degree. It’s okay as a family to be financially responsible, not only socially responsible, so I’m sometimes got written by some of my families that don’t have enough to pay for five years of college. And they’re like, well, COVID kind of made it happen. And like, he got to control your plan. And if COVID making it so that this is not a good year for your student, you go to school, or the recession just feels like we just don’t have enough money for the whole thing. And it’s okay to reset the plan. But it’s not okay to just let it ride and use the past excuse to get yourself in financial difficulties.
Beth Walker 12:29
Well, I think what both of you are saying it’s mindset, it’s about being the captain of your own ship. Because if you begin with the end in mind, and I think Lisa, what you were suggesting is look, people with a degree a post high school degree, whether that’s associates, whether that’s apprenticeship or something in the trades, whether that’s a bachelor’s or a master’s degree, they still continue to make more money in their working lifetime than those that don’t. So we start there. And Beatrice, what you’re suggesting is be clear about what the end result. But what what’s the outcome? The outcome is that I am employable that I put myself out there in a way where I can, from an economic perspective earn the most, if that means a four year college degree, and we’ve come up with a plan to pay for four years, but the marketplace changed, well, then we need to see how we change our plan. It doesn’t change the desired outcome, it might change the path. And I think that sometimes that gets lost. I know that, you know, I always call myself a mom on a mission because I have the heart of a parent, but the mind of a financial planner. And those are constantly in conflict. Because as a parent, what do we want? Well, we want our kids to be happy, we want to reduce the friction. But sometimes, and we’ve certainly seen this, sometimes when we reduce all the friction, we’re not doing them any favors. The fact of the matter is getting a college degree is the first big adult experience they’re going to have and that means big choices. And that means understanding how to make informed decisions. So being upfront about here’s the amount of money that we have to put into this project called College. Here are one or two or three ways to go about it. One is probably a lot smarter than the other two. That is inviting them into that conversation sharing your thought process and your decision making approach. What a great lesson and I think so often parents are just afraid to share that with their kids. And I think we should do more of that to help them understand why are we making the decisions we’re making.
Lisa Marker Robbins 14:46
It goes back to episode two of the podcast, which was in January of 22. So we’re nearing our one year anniversary. It was by best selling author and former Dean of freshmen at Stanford, Julie life, Khan Hames, and she wrote a book called How to raise an adult, like we’re on a mission to raise adults. We’re not raising kids, we’re raising them to be an adult. And Beth, I think that’s a fantastic point, like, these are real world issues. And if we’re raising adults, they’re going to encounter things like this in their lifetime. So we’re building resiliency, and teaching this to them while they’re under our roof.
Beth Walker 15:29
That’s right. I mean, I always use the analogy, we don’t drop a 16 year old off on a car lot and tell the salesman Hey, let them pick out whatever they want. We don’t do that. But we’re in effect, doing that with college all too often. And it’s like, wow, let’s really think about this purchase that we’re making called College. It’s a big decision. It’s a big investment of time, effort, energy, let alone money. And you know, like Beatrice was saying, you craft a very well thought out plan about how you’re going to tackle this over the next four years. And guess what, when things happen, you have to change your plans, doesn’t change what you’re trying to accomplish. But the way that you go about it may very well have to change.
Lisa Marker Robbins 16:17
Well, that gap your point to Beatrice that you made, those don’t have to cost money, right. And they can add from an admission standpoint, which is on the side that I serve clients, we always talk about, like inside my course I’m helping the students like, part of picking the college major in the career is by getting up close and personal and curating experiences to make that informed decision. Well, when you do that, you’re creating a really fantastic resume of extracurriculars that are going to be very appealing on the college side as well. So it’s not like taking a gap year as a loss. Taking that gap year is actually going to mature, your student is going to further build out the list of extracurriculars and probably a way they would not have been able to do and if they’re doing it with intention while they were in high school, because they simply the time doesn’t exist. And so in many ways, they may be more appealing to the colleges, Rick Clark, who’s Director at undergraduate admissions at Georgia Tech, he has a blog, I saw it somewhere on their site in the last month. And he said, you know, what, we’re creating that unique freshman class that we want to have, you’re selecting a major, and then we’re looking at your application for evidence of that, that basically my word would be as it was, an informed decision is not just throwing darts blindly. So that gap year, even though it would be maybe Plan B, for many families, it can be a Plan B with a great silver lining.
Beatrice Schultz 17:51
Yeah, and thank you for correcting that, or in the sense that yeah, Lisa, I did not mean go pay to be on a ship for a year. Find yourself that, that’s just me totally coming from the financial side, not the social and academic, not saying these programs are bad. But if you are worried if you are trying to get the money straight, and figure out what the budget is, to take a year off, take a year off and work, take a year off, take courses that are not going to be as expensive, you get the credit card. So exactly what you’re saying and how you’re working with all your students, it can be a great time to find yourself. And I have one student who literally did not get except for the college she wanted. And she took this gap year with intention, the best experience of her life, she came back she got accepted the school she wanted, but didn’t avoid it. That one went to another one. Because of all the learning. But so I just I love the examples of taking time off. And she admits you say to a bunch of money, which went towards helping her family pay for college. And so that can happen in the middle of some of these. If there’s a financial concern. It’s not good to just barrel forward, it’s good to have a plan. It’s good to have a plan that financially is not going to put your family at risk. So I worry about the Yeah, just cost us five years instead of four. And we’re talking an extra 2030 4050 6070 $80,000 to spread it out. Because it’s not much of a discount to go to school, halftime. You’re still paying for residents, you’re still paying for the tuition.
Beth Walker 19:24
And Beatrice, don’t you… I mean, I think as you say that, what if it cost you an extra $40,000? I think what happens is parents think of that in isolation. And what they’re not understanding is the opportunity cost about $40,000 Over the next 20 years. That’s what I think most parents can’t see. And again, they’re blinded by the heart of a parent and they’re not thinking about it with their consumer mindset. Because that’s $40,000 that you don’t have working For you, toward your retirement in the future. So I really think that we have a tendency to rationalize or underestimate the impact of these decisions. And that’s what I find having the opportunity to, to forecast for families, the real world consequence of some of these decisions, we’re just helping them see something that they don’t that isn’t readily available or isn’t readily apparent to them. But it’s a big deal. It’s a big deal. It’s a big deal.
Beatrice Schultz 20:31
It is a big deal. I think just to play on your analogy of cars, which I love, so you’re talking about the 16 year old coming in to buy a car. But not only that, even if the whole family buys a car, then we’ll drive it off the cliff. And next year, we can buy a brand new car, no family thinks of those as one purchase of car, but it takes some time to figure out what they can afford. And the price of a car is willing to one year of college not for it’s not a place, it’s really mine fleet of cars, and the opportunity cost your your 40s we’re talking years in retirement, it can make a difference of having cashflow food, while triple years to not spend $40,000 When you’re in your 40s. O paying that… spending that extra 40,000. And we know many families are worried that they don’t have enough cash flow for retirement. Just don’t do you don’t need to spend it.
Lisa Marker Robbins 21:23
You brought up a good point too, about when you were saying going part time and then extending it over multiple years is going to cost you more in the end. Graduation outcomes are actually better for full time students than they are for part time students as well. So this goes back to it’s just like, We know that kids who are more involved extra curricularly, who their time has actually tighter, typically have better grades. Of course, there’s exceptions to all of these, but I had Holly bowl on the podcast back in April of 22. And she does own a program that’s a pay to play gap year experience. But if you go back and you listen to that episode, she gives tons of advice that she even says you can DIY this yourself if you want. And so for a family that maybe depending on where we are economically in 2023, particularly if they have a senior, and they’ve got to make some hard decisions and bring their kid into that conversation. Like that’s a great resource. So if each of you lay in use, I think we all agree like don’t abandon the end goal to go to college. Like we’ve all been very clear. I think we’re all very clear on you must have a plan. Let’s each pick one piece of advice to leave a listener with, I always give my family’s college bound challenge for the for the weekend ahead when I listen to the podcast. So it’s usually something to do talk about or think about as a family. So let’s each leave him with one, Beatrice go first.
Beatrice Schultz 23:00
If you’re a family, and you do feel that you have been hit by recession, you’ve lost a job, the economy is impacting you. Financial aid is real. There is money out there that can help you if you target the right schools that can help you find financial aid, need based financial aid, much harder to get the merit to get to the price the price point, but talk to professionals about whether you could qualify for need based financial aid. If you are out a job or your incomes really dropped. That’s my advice to think about over the weekend.
Beth Walker 23:33
My piece of advice which is related to what Beatrice just said, is finance their future, meaning the kids and fund yours, meaning your retirement. We are so confused and conflicted about the concept of debt in our culture, that we meet a lot of families that make decisions based on never borrowing money or collateralizing or financing College because they think it’s not in their best interest. They don’t understand that we finance everything that we buy when you buy a car when you buy a house. Anytime you’re making one of those major purchases that you can’t pay for fully. From monthly cashflow. You’re looking for the lowest cost most cashflow efficient capital to do it. College is right in line with cars and houses. But we’ve just got this mindset that we can’t do it, we can’t use it. And nothing could be further from the truth. So if we understand that we should finance their future the kids so that we can fund our future, our retirement. It’s all about organizing it in a way that allows you to maintain your current lifestyle, stay on track for retirement and get them through school and It works, it can be done, be interested, I do that every day. But sometimes it means looking at things differently. And you’ve got to be open minded, especially when we’re in challenging times like now,
Lisa Marker Robbins 25:13
I always say, to my students who I’m working with on the college major and career piece, you come into it usually with some ideas, because we’re asking them from the time they’re three, what do you want to be when you grow up, and they only know that things are experiencing. And I always say, like, hold things loosely, while you investigate and then make a plan. And so when I think about how you tour advising families, this whole idea of hold the path to get there loosely, and be open to changing it, my piece of advice would be, I see the changing of college majors, the going in undecided and experimenting, choosing a college without knowing how the if they admit by major and whether they have restricted majors by a restricted major, I mean a major that like for University of Illinois, Urbana Champaign, if you don’t apply for computer science, in the senior year of high school, they do not take students and you cannot internally transfer into it later. Nursing at Creighton, biomedical engineering at Johns Hopkins, there are plenty of those not having that college major correctly ideal and aligned with who you are your values. And where you’re headed in life is one of the greatest things that you have control over, even on the path that you’re in in high school to make sure that you don’t extend your time in college and overpay.
Beatrice Schultz 26:37
Couldn’t agree more. School selection, I tell people this all the time choosing the right school, that’s a fit for that kiddo. Which is the work that you do. Lisa, I can’t imagine trying to tackle this without knowing that. I’ve come up with great four year cash flow plans for parents, but when you don’t take that student centric approach to why are they going there? What’s it going to do for them? It’s going to derail your financial plan. So I couldn’t agree more.
Lisa Marker Robbins 27:05
Now I think everybody got a taste of why we’re friends. I we would sit on a beach on vacation. And we talk about these things endlessly and come up with podcast ideas and plans to help families. So I will link to everybody’s websites on our show notes as well as the past episodes on gap year and how to raise an adult Beatrice, you are in southern Washington State but right now coming to us from Florida. Beth is in Colorado Springs and I am in Cincinnati, Ohio and we found each other over a decade ago through college planning and our fast lifelong friends. Thank you my friends for joining me on the podcast.
Beth Walker 27:50
Thanks for us.
Beatrice Schultz 27:50
Thanks for having me. That was awesome!
Lisa Marker Robbins 27:56
the fact that the three of us sit on the beach talking about these things is a testament to the hearts we have for families on the college bound journey. As you know, each week I leave you with a college bound challenge for your family that I encourage you to complete by the end of the next weekend to keep your momentum going. gell Hyatt once said people lose their way when they lose their why I want to encourage you as a family to dig back into the why of your college bound journey. While the path might change the destination that college degree shouldn’t. I’m also going to provide in the shownotes the episodes on taking a gap year and how to raise an adult in addition to other paying for college related episodes, just in case you want to bend on some College and Career Clarity. If today’s episode was helpful to you please share with a friend who needs us to and while you’re at it while you pretty please do me a favor and take a minute to rate and review wherever you listen. Doing so helps spread the word so we can move more families out of overwhelm and onto clear and confident about the future for their team.