Financial Wellness

It seems that you can open any media feed, listen or watch any news report, and you will hear about the high cost of secondary education. Because of this, we often hear about people questioning whether to even go to college or if a degree is worth pursuing. There are many decisions between the point you decide to pursue a degree and the point where you begin to earn a living. Luckily, you have chosen the profession of physical therapy.  A profession that is not only personally satisfying but lucrative enough for you to make a living wage.

That said, between the time that you are in college and the time you start to earn a salary, you have to figure out how to pay for your degree. You also have to figure out how to get through the day-to-day activities that challenge your resources. Balancing the monetary needs of your daily life with the financial constraints of the money you have available contributes to your financial wellness. Financial wellness, or financial well-being, can be defined as the ability to meet basic needs and manage money for the short-term and the long-term. 

Financial wellness is a personal state that’s constantly changing, and is based on managing funds in one’s life. Whether you are in school or have started your career path, financial wellness can include: meeting current financial obligations, making choices that enhance your life, feeling in control of your finances, being able to track financial goals, living within your means, and having peace of mind (https://www.unh.edu/health/financial-wellness).  

Financial wellness begins with identifying where you want to go. Yes, setting a goal is important. Ask yourself “Where do I want to be?” and “Where am I now?” Only then does it make sense to figure out how to work towards your goal. It’s important to make a budget. This does not have to be complicated, just a basic understanding of Income (money available to you or coming in) minus Expenses (Needs) versus Discretionary spending (Wants).  

For example as a student, you may be doing some part-time work bringing in $450 per month. Your college expenses may include items like groceries, utilities, rent/housing, insurance, supplies, etc. which totals about $1,800 per month. Because of your expenses, you have a month loss (gap in income) of $1,350. Therefore, as an example, taking into account tuition of $70,000 for a full program, plus monthly expenses ($1,350x36 months) of $48,600 equals a total need of $120,290 for your full program.

Tuition = $70,000 + monthly costs $48,600 = $118,600 TOTAL.  

EXAMPLE:  Tuition for 3 year program                      $70,000
                     Monthly expenses gap x 36 months    $48,600
                     TOTAL needed for education                 $118,600 in addition to current income

Outside of family assistance, meeting this gap usually requires taking out a student loan. While this is not a decision to be taken lightly, this is a helpful option to get your degree. It is okay to take out an educational loan, however, your future self will thank you if you do this responsibly and with financial wellness in mind.  

Before deciding how much of a loan to borrow, think about 
1) Type of loan—government or private
2) How much to borrow based upon monthly repayment
3) Repayment options

There are loans from the federal government that typically have lower interest rates. These should be your preferred choice for covering educational costs. Remember, educational costs include living expenses that may not be covered based on your personal resources or your working ability. There are also loans available from private companies and banks, which typically have higher interest rates, may require payment before you graduate, and often have more stringent repayment options. Be sure to read all the documents before singing for any loan.

When deciding how much to borrow, think about what you really need.  How much of a gap do you need to fill? Calculate this amount yourself, using the information already presented. Then, estimate your future earnings. You can look to helpful websites like salary.com, Glassdoor.com, indeed.com to get an idea of what an early career PT or PTA might earn in your region of the country.  You will also want to estimate what your actual take-home pay will be after taxes and deductions, such as health insurance and 401(k) contributions. Another helpful website to calculate your actual take-home pay is www.paycheckcity.com. This website allows you to enter your income and expenses and will calculate your monthly pay amount. 

Having projected how much you may make upon graduation, now think about how you will pay off the amount of money you are going to borrow.  For example, see the table below to compare how much the time allotted to pay of the loan affects the actual monthly payment and overall amount paid. 

As you can see, there is less of an overall amount that you pay if you can pay your loans back sooner, but the reality is that many of us are not able to make a $2,412 payment every month after graduation. It is critically important to take a look now, at what you NEED and project what you will be able to AFFORD to pay back of how long a period of time, BEFORE you sign that paper committing to pay it all back. That is what a Promissory Note is, you are promising that after you get your education and have a job, that you will pay this back. The ramifications for not doing so will result in a negative credit score and collections due to default and will follow you for many years to come. 

Most government loans have a “grace period” whereby payments are not due until 6 months after graduation. Additionally, federal loans offer various repayment options, including Public Service Loan Forgiveness (PSLF). If you work for a qualifying public service organization, such as the Public Health Service, for 10 years and make the required payments during that time, your remaining loan balance may be forgiven.  

Some employers offer loan repayment programs, where you can work for a company for a set amount of time and the company will assist or reimburse your loan payments.  Federal loans have options such as Income-Driven Repayment (IDR) plans, "Pay As You Earn" (PAYE), and even temporary relief options based on hardship or income. 

Loan consolidation is another option that may be presented to you upon graduation. It’s important to review the Terms, as consolidation can include either fixed interest rates (which do not change) or variable rates (which can increase over time).  Be cautious of “predatory lenders” — companies that consolidate loans for a profit which can be detrimental to your financial wellness.  Consolidation of loans can result in high interest rates that will shackle your earnings to make it very difficult for you to make your payments and meet your expenses.

Universities are required to have a Financial Aid Department with counselors who are available to talk you through these decisions. You can also seek out a Certified Student Loan Professional (CSLP) who are trained and committed to assist students with loan repayment decisions.  

Financial wellness is about balance. It is about balancing your income with your needs and your wants in order to have peace in your life.