Although college graduates leave their institutions of higher learning with a diploma in hand, often many are lacking in personal finance know-how.
Even worse, college students often don’t know what they’re lacking in knowledge when it comes to money. In 2015, 57% of college students rated their financial skills as either good or excellent, according to a survey from the American Institute of CPAs. Yet, only 39% of those college students surveyed had a monthly budget. And, almost half said that their bank account balance had dipped below $100.
The post-graduation period can be a crucial time for establishing smart money habits that can pay off over a lifetime. A student financial planner — or a financial advisor for college students who have recently graduated — can offer invaluable advice during this unique transitional period when it comes to making financial decisions.
How a financial advisor can help a college graduate
A financial planner’s role is to help guide clients toward their best possible financial outcome. If you’re a recent college grad, a financial planner can help you work through many financial firsts you may be facing. These can range from managing a higher income to tackling student debt, as well as planning and saving for the future.
We talked to some financial planners to see how they help college graduates get a head start on their finances. Here’s what they had to say.
Get on the right path from the start
The months and even years right after college are a critical time in your financial life. That’s because “bad money habits are not yet established,” said Brett Walters, a certified financial planner (CFP) and founder of Trident Financial Planning based in Nashville, Tenn.
Making mistakes and figuring out your finances through trial and error can be messy and painful. But a financial planner can help you get it right from the start. “Making a small positive impact can yield tremendous results given the long time horizon,” Walters said.
“Most financial decisions that will have a lasting impact 30-40 years down the road occur when you’re in your 20s [like] buying a home, getting married, starting a business, investing for retirement,” said Stephen Alred, Jr., a wealth advisor in Atlanta.
That’s where a financial planner comes in. “It is important to have a financial accountability partner to help steer you away from bad decisions and towards ones that align with your life’s goals,” Alred said.
Make a plan to pay off student debt
For college students and recent graduates seeking the help of a financial planner, one of their most common goals is to figure out how to effectively tackle student loans.
“Millennials are saddled with more education debt than any generation before,” said Mel O, a CFP with Hot Moon Financial in Las Vegas. “It is important to get together a strategy of how to start tackling that debt.”
With today’s student debt outpacing graduates’ earnings, many will find their student loans unaffordable. This is why knowing your financial options is so important.
“Student loans can be incredibly complex,” said Matt Hylland, a financial planner with Hylland Capital Management. “Should you refinance? Are there forgiveness options or special payment plans available? Is your loan forgiveness taxable?”
A financial planner can help you find the answers and figure out the most advantageous student loan repayment plan for you.
Create a post-college budget
Graduates may have a higher income to budget with after college than they did as students. However, they will also face new costs, from paying for new housing and other expenses to repaying student debts. Yet, many college students don’t budget their finances and regularly have extremely low bank account balances. That’s not a recipe for sound financial management after college.
Additionally, with a higher income, college graduates may have to battle the impulse to spend it. “With the new income, there is a temptation to go out and spend money on cars, apartments, cellphone plans, etc.,” said Joseph Orsolini, a CFP with College Aid Planners.
Orsolini pointed out that for instance, many graduates will get all of the above things, which will add to their fixed monthly expenses. Yet, they don’t realize that their student loan payments will start six months are they graduate and the grace period ends. “It is difficult to add in a student loan payment when most of your paycheck is covering fixed expenses,” Orsolini said.
Getting a financial planner’s assistance to create a budget can help you create a spending plan that’s both realistic for today’s needs as well as helpful for planning and saving for the future.
Prioritize financial goals
Part of creating a smart budget is knowing what you’re working towards. Deciding on your most important financial goals can help you more efficiently prioritize your dollars to achieving them.
Walters said the top questions he gets from recent college graduates are how to decide whether to put retirement, student debts, saving for a home or other financial goals first. “Not everyone’s answer is the same,” Walters said. “Each individual’s situation is unique and many factors will influence what is the best for them.”
According to Walters, this is why it’s important to start meeting with a financial planner as early as possible. “[T]hey can help provide peace of mind by providing you with a sense of direction of what is best based on your individual circumstances,” he said.
Start saving for retirement and investing
Another common task that financial planners can help new graduates with is saving for retirement. Getting an early start on retirement savings can have tremendous payoffs later. A financial planner can help ensure your investments are optimized for the greatest returns.
If you’re working your first job and dealing with retirement savings accounts for the first time, you’ll probably go with the default 401(k) plan and contribution options. However, going with a default 401(k) allocation may not be the best option for you.
“For a recent college grad who was never taught the ins and outs of investing in 401(k)s or asset allocation, this is not a decision to make on a whim,” Hylland said.
A financial planner, however, knows all about retirement savings accounts and investment strategies. He or she can help you choose investments that balance your levels of risk and return.
Choosing a financial planner for the first time
The benefits of getting a financial planner as a recent college graduate can be well worth the investment. But make sure you do some research to find a qualified financial planner with affordable, transparent fees.
“I agree wholeheartedly that college grads desperately need financial advice,” said Robert Wilson, a financial advisor with Wilson Insight. “They just need to make sure that they get it from the right source.”
A fee-only planner is usually the place to start. These financial planners typically charge a flat rate for advice and don’t have a payment structure that incentivizes them to push financial products that may not be beneficial to you.
Also consider avoiding financial planners that won’t meet your financial needs. Many financial advisors focus on providing investment advice, but that isn’t what recent college graduates necessarily need the most.
“[Instead], they need to speak with an advisor that will help them create a system that gets their finances in order,” Wilson said. “Especially since many of them have no experience managing money and were definitely not taught how to do so in school.”
Where to find affordable financial advice
If you are like many recent college graduates starting work for the first time, hiring and paying a financial planner might not be your first priority as you balance paying rent, covering the necessities and starting to repay your student loans. Depending on your first job, you might not be able to afford a financial planner.
However, it is possible to get free or low-cost financial advice. Assistance is available from credit counseling agencies such as the National Foundation for Credit Counseling or American Consumer Credit Counseling. In addition, Financial Planning Association (FPA) chapters around the country provide free financial planning knowledge and guidance from certified financial planners. You can go check the FPA site for links to local chapters that will provide information on resources available in your area. And if you specifically need help figuring out how to repay your student loans, you can search online for organizations that offer free assistance with that task.
As you get started with your post-college life, remember that you could benefit from the help of a financial planner to set a budget, begin to save for the future and, perhaps most importantly, begin to repay your student loans. Starting to plan early means having the money later to buy a home, raise a family and eventually retire.
Peter Fleming contributed to this report.
Interested in refinancing student loans?Here are the top 5 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of March 4, 2020 and is subject to change.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.21% APR (with Auto Pay) to 8.77% APR (with Auto Pay). Variable rate loan rates range from 3.21% APR (with Auto Pay) to 8.72% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of May 8, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 5/08/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.8100000000000002% effective April 10, 2020.
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|3.21% – 6.67%3||Undergrad & Graduate|
|3.21% – 8.72%4||Undergrad & Graduate|
|3.22% – 6.05%5||Undergrad & Graduate|