When it came to paying for college, Celeste Hernandez Revelli wishes she could go back in time — and tell her younger self to avoid all those mistakes.
Revelli is now the director of financial planning at eMoney Advisor in Radnor, and she creates interactive plans for financial advisers to help their clients avoid the errors she made.
Revelli grew up in Voorhees, the daughter of a nurse who emigrated from the Philippines. “My mom actually wanted a career in finance, but that wasn’t a traditional career path for women there," Revelli said. "So she became a nurse, and supported me and my brother and put us through college” in the United States.
To pay for college, her mother, a single parent trying to do the right thing, went to a local bank and took out a federal Parent Plus loan.
“What we didn’t know was how much it would cost down the road,” said Revelli, who graduated from Loyola University, a private Jesuit college in Maryland, in 2008 with $90,000 in debt.
Looking back, Revelli, 32, would have done things very differently.
“I would have researched all the options for college instead of loans — such as grants, scholarships, and financial aid. Or perhaps I should have gone to a community college for two years. I would have looked much more closely at the costs ahead of time, calculated the loan repayment schedule. Now that’s what I do for financial advisers" at eMoney Advisor, she said.
When she met her husband, Tom Revelli, he had a balance of $60,000 in school loans from the Art Institute of Philadelphia.
Neither of their parents had college savings plans set up, and so “we had to figure out how to properly apply on our own, and we struggled with debt for years after,” she said. “Obviously, we would have made better choices about the schools we chose and the tuition we paid if we only knew more.”
In about a decade, the couple have almost entirely paid down their combined $150,000 in school loans. Tom, 37, has just a few monthly payments left, and in 2017, he and a partner opened Urban Village brewery in Northern Liberties.
How did they do it?
“A lot of money that we would normally have been saving went toward paying down more debt each month," Celeste explained. She contacted her lenders and initially went on an income-based repayment plan. And after she started working, she put extra money toward her loans from a second job, which she kept until 2016.
She worked in financial services while also tending bar on nights and weekends.
“Now, every dollar that comes in to our household has a job,” she said.
She also got a higher-paying full-time job at eMoney Advisor.
“We both nearly tripled our incomes between then and now,” she added.
Saving was key. “We knew we’d have to save to get married in 2017, and a week later the brewery opened,” she said.
“Tom and I just only recently started going on trips out of the country together. Before, we would take road trips and other things like that, but I have always wanted to travel more and never really had the means or the time to do so since we prioritized work, helping out our families, the wedding, and the brewery,”
Many millennials “think that they should be doing all these things right, like having a grand wedding, buying a house, and taking amazing trips, because it is what they see on social media, when in reality, to pay for these things on your own, it takes hard work," she said. "For years, Tom and I both worked on weekends, many times with no days off. I would work at Buddakan or Landmark Americana [restaurants] after working my day job during the week, too. We missed family get-togethers and nights out with friends, but in the end we ... knew that we wanted to be in a better place financially.”
Savings as a percent of income may not be realistic — at first
Instead of beating yourself up for not saving, “start with as little as you want — even $5 a month” to get in the habit, she said.
“When we budget every dollar, I started using sealed envelopes for funds," Revelli said. "For example, one envelope had student loans, one dedicated to vacation, rent, a new car, computer. Then I had a second job, so I did it in my bank account, or different accounts that allow you to name your goals. I paid off my loans in eight years,” instead of the typical 10 or 20 years.
Her student-loan servicer, Navient “was just OK, but I definitely had to do all the reaching out to them. I never got a note that I paid off my loans. So I had to call them to make sure.”
Parents, ask a financial adviser — before borrowing
Consider tackling the student loan with a financial adviser before you borrow. Some may offer help, while others may have no experience, but you should at least request a road map.
Some “advisers aren’t used to this discussion, and, typically, they don’t have experience,” said Adam Holt, founder of Asset-Map.com, a software start-up for financial planners.
“I tell my clients that mortgaging their own retirement for kids to go to expensive schools isn’t a plan," said Holt, who is based in Philadelphia. “It’s not yielding clear results in terms of their kids making more money. I ask them, ‘Can you afford another $1,200-a-month loan payment on top of your mortgage, and your spouse not working? If they can’t, then they are ‘dis-saving’ for their own life.”
Also, sometimes paying for college instead of saving for retirement sets up a damaging future family dynamic.
“We walk parents through the scenario: You’re 65 and have to sell your house to fund your retirement. You do that because you paid for your kids’ college. If you ask the now-adult child, ‘Was it worth it?,’ the kid may say, ‘You shouldn’t have done that for me.’ Now the kids have to support you financially. That’s the fallout I’m seeing,” Holt said.
Holt, 45, was accepted to Bucknell, with no scholarship money, and to Drexel on a full scholarship.
“But I wanted to row Division 1 crew at Rutgers. So my grandparents paid one quarter, each parent paid one quarter, and I paid a quarter. I paid by working full time for four years at the campus center information booth, and rowed crew.”
He then went to Drexel for an executive MBA, which “I paid for myself on my Amex card while I was working and making a salary. In 2003, I consolidated that debt and my Rutgers debt into one loan at 1.5 percent. I’m still carrying those student loans because the cost of that debt makes sense all day long” compared with investments, say, which can return 5 percent annually. His $14,000 balance is now down to $7,000.
Know the true costs — not just the sticker price
While the median tuition and fee price for full-time students attending private nonprofit four-year institutions in 2018 to 2019 totals $36,890, 11 percent of full-time students attend institutions with prices below $15,000. And an additional 20 percent attend institutions charging $51,000 or more, according to the College Board’s latest Trends in Pricing.
Alex Bottom of Los Angeles, co-founder of LoanBuddy.us, says the "We are empowering financial advisors and CFPs, certified financial planners, with technology to help their clients with their student loan debt. Understanding what happens over the life of the loan in a federal income-based repayment plan is complicated and LoanBuddy has made this simple through automation with our advisor-facing technology.” The software start-up is also about to launch a direct-to-consumer version to help parents and students.
As for Revelli, she stresses some basics. Even a tiny savings account will pay off in the long run, forming the habit now and auto-saving, or adding a company match, she said.
“Many millennials think they cannot save anything right now, and are focused on debt and living expenses, which is so understandable, as I was definitely not saving anything during my first year or two after college," she said. "But pay yourself, too [into savings], along with everything else, and eventually with hard work and perseverance, you will end up earning more money, having less debt, and will have even more to save.“