Tenacity marks college grad’s goal of unloading student debt
I wrote a few weeks back about a 2018 Texas Tech graduate who struggled to get her college degree with no financial support from home. Her work colleague Hannah Sullivan also came from a family of very limited resources but enrolled in a private university.
One of the first surprising things to know about paying for college these days is that in some cases private universities are more affordable than public ones, especially for students with strong academic qualifications but limited family means.
Hannah enrolled in Trinity University in San Antonio because she received a generous package of federal, state and university grants, based on both her academic merit and financial need.
Hannah describes feeling like she had won the lottery when the financial aid package from Trinity offered her a President’s Scholarship worth $60,000 for four years, Federal Pell grants worth $21,400 over four years, a TX Tuition Equalization Grant, a Trinity University Grant based on financial need and an opportunity for work study.
She initially figured college was paid for. Indeed, her offer was very generous, and a better package than what she could reasonably expect to receive from a public university. It also was essential. Hannah’s mother had declared bankruptcy a few years before. As a single mom with an estimated $29,000 in income and two children, she could not pay for any part of Hannah’s college education. Her mom’s bad experience with debt had left her with a searing aversion to indebtedness.
But the free tuition wasn’t enough to to keep Hannah from struggling financially.
The key point that Hannah learned quickly was that room and board for living on campus at Trinity would cost her more than $10,000 per year. There was no way for her to raise that kind of money except by borrowing.
In order to save $10,000 per year for room and board, she petitioned to live off campus, with her mom, who happened to live five minutes away from campus. She was denied, until her final year. Trinity requires undergraduates to live on campus for at least their first three years.
Trinity has good reasons for the policy.
Eric Maloof, Trinity’s vice president for enrollment management, explained to me that the university’s residency requirement is based on “a deeprooted educational philosophy that benefits the students.”
“They live among their peers with students from 45 states and 65 countries. We believe in creating a residential experience that resembles the world that they will go out to,” he explained.
As an adult who benefited from a four-year residential experience, I agree with Maloof. The value of college is often captured outside the classroom. Easy for me to say, though, as I didn’t have to borrow for the privilege.
For Hannah, even two years after she graduated, she’s still somewhat resentful about having to take out loans for something that could have been almost free to her had she been allowed to live at home. For her, the university seemed to be requiring her to take a very expensive route that required her to go into debt, reluctantly.
With so little ability to pay, and her aversion to debt, she felt compelled to cut financial corners, including in unwise ways. She canceled her Trinity-required health insurance midway through the semester in order to get a refund on the insurance premiums she had paid. This saved her hundreds of dollars, but of course put her — or her family or the university — at terrible financial risk if something catastrophic happened.
Her choice on the one hand is understandable from the perspective of a broke college student, but seems terribly risky on the other hand. But again, that’s easy for me to say, because I didn’t face that choice. Canceling one’s health insurance to save the premium is the kind of dilemma that a college student from a financially secure family wouldn’t dream of facing. Fortunately, Hannah did not suffer any serious health consequences as an undergraduate.
Even with cutting corners, she graduated from Trinity in 2016 with $27,500 in total loans.
Trinity’s Maloof reported that the average debt burden of all 2018 graduates at Trinity was $18,892. Maloof hastens to add that this number needs some additional interpretation, however, since only 44 percent of all graduates finish their studies at Trinity with student loan debt.
The combination of Hannah’s aversion to debt plus the generosity of her financial aid package means she graduated with less debt than the average borrower; the current national average is close to $40,000.
To talk to Hannah is to get a sense of a young person willing to sacrifice a lot to get a great education, get out of debt and get on to the asset-building phase of life as soon as possible.
Since 2016, she has attacked her loans with ferocity. She initially lived at home, saving on rent. She meticulously tracks her expenses on a spreadsheet. Once employed, she created what she calls a “hidden savings account” to send money to where she wouldn’t be tempted to spend it. She enrolled in a tax-advantaged 403(b) retirement account at her first job. She also contributes to a small investment account via the Robinhood app.
In just two years, she’s cut her debt by more than half, reporting to me last week that she’s down to owing just $12,843.78 on her student loans.
Some people you meet and you just know they are going to be really good at building up wealth in their lifetime, no matter what it takes. I’d bet a lot on Hannah.
(Disclosure: I have taught a personal finance course at Trinity in the past. Hannah was never a student of mine.)