A collective gasp filled Rockford High School’s auditorium when Rachel Ramsey Cruze told the story of a 20-something college graduate who had amassed $90,000 in student loans following graduation. The groaning didn’t end there.
This same graduate married a woman who also was saddled with $90,000 in student loans, for a shared debt load of $180,000. Their financial obligation led them by the nose for years to come.
“For 10 years straight, (much of) their money will go straight from employers to lenders,” Cruze told about 600 Rockford seniors recently. She is the daughter of financial author and motivational speaker Dave Ramsey, and co-author of the book, “Smart Money Smart Kids: Raising the Next Generation to Win with Money.”
Cruze gave students some common sense insights to help them avoid pitfalls college freshmen often make. She said high school students need to be aware the decisions they make while in college often follow them long after they’ve earned their sheepskin. That’s why it’s important to know how money works, she stressed.
“Just avoid the mistakes that take some people years and years to get out of debt,” Cruze said. “Money is just common sense.”
Her talk supplemented a Rockford High School personal finance class that uses Dave Ramsey’s personal finance DVDs. 
Teacher Noel Fike said Cruze’s advice was spot on.
“They’re not close to being financially literate yet,” Fike said of students. “I love teaching the class because it’s new for them and easy for them to understand why it’s important to them. Everybody needs to know how to manage their own money. It’s not something you memorize for a test and never use again.”
Sidestep Money Pitfalls
Cruze offered plenty of financial pointers for students to use. Among them:
- Be wary of credit cards. It’s not uncommon for students to be enticed to sign up for credit cards with offers of a free T-shirt or meal. End result: The average college student is encumbered with $4,000 in credit card debt. Said another way, if a person charges $1,200 to a credit card and makes the minimum payments on it for 13 years, he or she will end up paying $2,300. Be wise to such schemes, Cruze said: “College students fall into this trap all the time.”
- If you don’t have the money, don’t buy it. “Debt can be a confusing topic for a lot of people. This is what debt is: when you owe anything to anyone for any reason.”
- Postpone buying until you can afford it. Too many students believe they must have the latest gizmo that just hit store shelves. “We live in a culture that says ‘It doesn’t matter. I want it right now.’ I’m not against technology, but we have to know how to handle money right even when we don’t have the money.”
- You can live without a credit score. Too many assume they need to develop a credit score and the only way to do that is charge up a bill. Some say it’s necessary to secure a car loan or rent a car. Cruze said there are ways around that. “I do everything I need to do in life without a credit score. A credit score is mainly to get into more debt. Have a debit card instead. You can rent a car, rent a move, do everything with a debit card.”
- Avoid car loan debt. “It’s the dumbest debt a person can (incur). Cars go down in value. You lose money on it.” Better to pay yourself instead, Cruze said. Someone who invests his money early into a mutual fund instead of paying off a new car would on average earn $5.3 million by age 65. “I never saw a car worth $5.3 million. Pay instead for your car with cash.”
- Minimize student loans. “A huge lie says you can’t be a student without a student loan.” Cruz cautioned that the average first-year, post-college job pays $35,000, while the average student loan is $700 a month. She advised students instead to start out at an in-state college, preferably a community college, because in the first year everyone primarily studies the same subjects. “It may not be exciting but it’s smart. Don’t step over the state lines paying three times more if you don’t have the money.” Make it your mission to apply for scholarships and grants, she added. “For a private school, if you don’t have the money or a scholarship, don’t go.”
- If possible, pay tuition in cash by attending an affordable college and working about 20 hours a week. “Some colleges will put you on a cash payment plan. You can literally work your way through college. Work your butt off and the next 20 years of your life are completely wide open.”
Students Appreciate Advice
Cruze’s talk was eye-opening for senior Jeff Harmon. “I didn’t know you didn’t need a credit card to get a student loan,” he said. “That was quite surprising.”
“I like the idea of people saving more,” added senior Amanda Strome, who plans to study finance in college. “It’s so easily forgotten.”
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