Afford Anything - How to Avoid College Debt, with Anthony ONeal

Episode Date: December 27, 2019

#232: Anthony ONeal is the bestselling author of Debt-Free Degree, a book that teaches parents how to help their children graduate from college without student loans. He’s part of the Dave Ramsey Solutions team, which teaches people how to pay off and avoid debt, and he's the co-author of Graduate Survival Guide, along with Rachel Cruze. Anthony joins us on this episode to share tips and hacks to help you save on tuition and find money for college. For more information, visit the show notes at https://affordanything.com/episode232 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention, anything in your life. That's a scarce or limited resource. That leads to two questions. Number one, what matters most to you? And number two, how do you align your day-to-day decisions in a way that reflects that?

Now, answering these two questions is a lifetime practice, and that is what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. And today, we're going to talk about how to graduate from college debt-free. So whether you are the parent of a kid who you hope your kid will graduate from college debt-free, or whether you yourself are in your 20s or 30s or any age and you want to go back to school, we're going to cover a whole bunch of tips around how to both find money for school and save on the cost of school.

Now we're going to cover this topic in two ways. First, I'm interviewing Anthony O'Neill. Anthony is the author of a book called Debt Free Degree, which is a book that teaches parents how to help their kids graduate from college debt-free. He's part of the Dave Ramsey team, and he co-authored another book called The Graduate Survival Guide with Rachel Cruz, who is Dave Ramsey's daughter and also part of the Ramsey Solutions team. Now, Anthony has an interesting story. He made tons of mistakes. He took out $35,000 in completely unnecessary debt before. before he even graduated from high school.

And when I say completely unnecessary, I mean, this wasn't debt that he took out to cover tuition or anything like that. This was debt that he took out to buy furniture. So he dug himself into a $35,000 hole, eventually hit rock bottom, ended up having to sleep in his car for a while, paid it all off,

and has lived debt-free with the exception of his mortgage ever since. So for the first roughly 45 minutes of this show, maybe 50 minutes of the show, Anthony and I are going to talk about some of the advice that he offers in his book, Debt-free degree. And then in the last one-third of the show, starting it around the 45-minute to 50-minute mark ish somewhere in there, I'm going to elaborate on some of the tactics that we touch on, as well as introduce additional tips, different hacks that people can use to significantly reduce the cost

of college. So with that being said, here is Anthony O'Neill to discuss how to get a debt-free college degree. Hi, Anthony. Hey, Paula, how are you? Thanks for having me on. Oh, thank you for being on. Anthony, I want to talk to you about how to get a debt-free degree. And your interest in this came about in part because you did everything wrong. Tell us about that. I did absolutely 110% everything wrong. I wish I can go back and slap my younger self around and just not some sense into myself. But, you know, I borrowed about $10,000 in student loans when I didn't even need Impala. My father had the GI Bill, and I had a partial scholarship from the National Forensics League to go to school. Not only did I take out $10,000 when I didn't need it, but I also took out $15,000 in credit card debt,

then another $10,000 in furniture debt. But then six months I'm graduating high school. So before I even turned 19, I'm $35,000 in debt. And I'm making some bad decisions. and unfortunately I get kicked out of school. When I get kicked out of school, my parents didn't allow me to come home. And so for a period of my life, out a very young age of my life, I'm $35,000 in debt, trying to figure out where am I going to sleep for about a period of six months in my life.

And some of those nights, a lot of those nights, were in the back of my car in Oceanside, California. And so I wrote this book, that free degree because I wanted to help parents who really want to see the best for their kids. And one of the reasons why I made the poor decisions when I graduated, high schools because my parents didn't really know much about financial literacy, how to be a good steward, how to go to college and pay for it, cash without debt, and really how to teach me all things around finances. And so this book is to help young people, parents pay for their students, their kids, college, because I know this is what my parents needed. Out of sheer curiosity, furniture debt?

Furniture debt, yes, ma'am. Aaron's sales and lease got me for $10,000. I was paying on it monthly. And when I had to move out of my apartment, and unfortunately, I lost the furniture because I couldn't afford to pay for it. And so they've rented center, buy here, pay later. That's the kind of furniture that I unfortunately part in. Oh, wow. So your like your couch got repoed. Oh, man. My couch, my TVs, my refrigerator, the coffee table stand, bed. I borrowed a bed from there. So it was. It was a poor decision. How did you pull yourself out of that?

You know, that's a good question. And one thing I tell everyone when I'm asked this question is I really had to, one, change the mindset of how I was looking at things. You know, when I was younger, it was keep up with the Joneses, have the latest and the greatest stuff. And now it's all about living with intentionality, be a young man of character, have a hard work ethic. And so that's exactly how I got myself out of it.

I told myself that I'm no longer going to borrow any money. I am going to live with intentionality, meaning every single decision that I make, whether this is around life, whether it's about the new relationships that I'm forming, whether they are friendship relationships, mentor relationships, dating relationships. I'm going to be intentional about making sure I'm surrounded myself with the right people. I'm going to be intentional about making sure that I'm saving money. I had a hard work ethic, so not only did I just get one job. I had a full-time job, and then outside of that, I was washing cars on the side. So I was being intentional about working hard every single day. And when I got the paycheck, I was still living with my parents.

My parents said, hey, come on back in for six months. So this means that I wasn't paying them rent and I was eating at home. So about 70% of my paycheck was going towards my debt. And so within a matter of four to five years, I was actually able to get myself out of debt. Today I'm 35 years old. Have no debt. Just have my mortgage and completely 100% debt free outside of that. So that's how I got out of it.

I just really made the decision to stay away from debt, to live with intentionality, be a young man of character who's working hard each and every single day, to build up my savings and to build up wealth and avoid debt. At the time that your parents didn't allow you to come back when you were deep in debt, was that to teach you a lesson? Yes, you know, it wasn't really my parents. I would definitely say I would say it was my father. You know, my mom, I had no problem with me coming home.

But my dad knew if I allow him to come home, he will never become the man. that he should because we then have covered for his mistakes. And he needs to feel the weight of his mistakes because my father's thought process was if we died tomorrow, the world is not going to invite him back in. And so we got to prepare him now where we are living. And so it was tough love. You know, my father knew where I was. He checked up on me often. He never told my mom the situation what was going on. With that being said, my dad did what a father, I believe, has to do is while he didn't want to see his son hurting and living that kind of lifestyle, he knew that that's the only way that that knucklehead Anthony O'Neill at 19 years old needed that tough love,

which was honestly the best decision my father has ever made for me being my father. And so you got kicked out of school. Did you, you eventually returned to school? I returned to school to complete my seminary. I did not go back to school to complete my bachelors, but I do have a degree in seminary, which is a Christian Bible. And did you pay for that in cash? Oh, you know I did. Before we go into how to pay for college in cash, let's talk about some of the big mistakes that people make. Like we're talking about your mistakes right now.

So what are a lot of the mistakes that you see other families making? You know, one of the biggest mistakes that I see families making right now is they're born against their retirement. They're taken from their 401ks, their Roth IRAs, to go ahead and invest into their child's college education program or their own college education. And I am not a huge fan of that. I had the opportunity to being on Washington Post earlier this week. And I was talking about just really making the right decisions. And one of the questions that came up was, can I borrow against my 401K to go back to school? And my answer was absolutely not.

You know, because you do not want to, again, let's say, example, you take out $10,000 to go to school and you borrow that against your 401k or you take that out against your 401k, it's going to cost you $20,000. And so now what you're paying $10,000 for actually costs you $20,000. And then that $20,000 over a period of another 10 to 20 years could be almost $150,000 that you could have earned from that $20,000. So I tell people do not borrow against that. And that is a huge mistake. There are ways to go back to college or to send you your child to college 100% debt-free. Another mistake that I'm seeing is, especially this younger generation, let's say, in the mid-20s

to 30s, they're actually paying for the college via a credit card. So you have- People do that? Yes, you know, which is crazy. So you're sitting here putting an education on a credit card that's going to have anywhere between a 17 to a all the up to maybe a 34% interest rate. And that is ridiculous. is. And so at the end of the day, you know, Paul, I want to see people do not make the mistakes

of financing and racking up student loan debt when it comes to their education. There are several ways. I don't care if this is for you trying to get your kid into school or if you're a mid-30 person like myself and you want to go back to school. There are ways you can go to school 100% debt-free. It may not be the most popular way, but it is definitely a for sure way you can go. back to school. I hear from a lot of people who say that they've stopped making retirement contributions so that they can instead save that money for sending their kids to school. So it isn't that they're borrowing against their current 401K balance. It's that they've stopped making current contributions. What do you think of that? You know, the only time I believe that it is okay to

actually stop investing into your 401K is if you're paying off debt. That's the only time that I would say, hey, you know, go ahead and stop paying and investing into your retirement funds if you are still in debt and you want to pay off your debt. Outside of that, I do not agree with parents stopping to invest into their retirement so they can invest into their child's future. Here's the thing. I want you to be on a solid foundation. There is a 100% guarantee that everyone will come to a day to where they need to retire. But nearly 55% of our students are graduating high school today. Out of three students who go to high school, two will go off to college when they graduate high school, and only one of those individuals will actually complete

college. So there's no 100% guarantee that your child will actually complete the college experience. Two, your child needs to feel the weight. You know, your child needs to fill the responsibility of making sure that they complete college. And so if they have some sweat equity in the game, if they're actually paying for something out of pocket, if they feel it, then they will complete it. But I believe that it is the parent's responsibility to guide and give them wisdom along this journey, not sacrifice their future, and they fill all the weight and a stress for it. So please do not, everyone listening to me on this podcast, please do not borrow or stop investing into your future. Are there any other major mistakes that you see people making?

So we've talked about borrowing against your 401K, halting your own retirement savings, and paying for college with a credit card, which I didn't even know people did. You know, another big mistake that I'm seeing is there's really no clear vision. There's really no clear plan. And so I believe that where there is no vision, that's where people perish. And I just believe if you don't have a clear plan, a clear vision of what you want to do, then you're just going to throw yourself out there in a school and you're going to be wasting a lot of money. And so what I'm suggesting to young people to step back, identify, maybe going to a four-year university is not the best route for you.

I do not believe that college is for everyone. I do believe that education is for everyone. But the traditional four-year route may not be for everyone. And so some of the biggest mistakes I see are parents and young people just throwing themselves into college and not really understanding and knowing where they're. going in the future. Right, absolutely. And you mentioned that in your book as well, that sometimes parents forced their kids to go to school because that's what the parent wants, when in fact, that child would be much better served, I shouldn't say child because they're 18, but, you know, that young adult would be much better served if they went to a vocational school and became an

electrician or a plumber or followed a passion for some type of trade. Yeah, yeah, I agree. A couple of weeks ago, I had the opportunity to speak in Sacramento, California in front of 10,000 individuals. And I was talking to parents about really understanding this generation of young people and not just young people as far as a high schoolers, but, you know, that 18, 20, 20, 24 year old. And one of the biggest things that these young people tell me is I wish my parents would work together with me to build my future, not just tell me what my future will be. And so if you come together, ask your, ask your young person, ask your teenager, ask your young Goodell, hey, what is it that you want to do, son? What is it that you want to do, daughter?

You know, Mom, I want to be a doctor. I want to be a lawyer. I want to be a teacher. I want to be a pharmacist. Okay, cool. Let's work together. I'm not going to make you go to my school because that's where I went. I'm not going to make you be a doctor because that's what I want to do. Now, let's figure out what's in that young person's heart? What are they going to be passionate about? What are they going to be excited to get up and do every single morning for the rest of their life? what are they going to be excited to get up when they're in college and go to school and learn what's in them? And so if we can work together hand in hand, I believe that both parties will be happy because this young person will complete school. In your book, you also talk about how it could be useful for some people to take a gap year. Like if you're a young adult and you don't quite know what you want to do, taking a year off after high school to work gives you the opportunity to save money and figure stuff out. Yeah. And the key thing when it comes through gap years, I don't want you wasting money nor time. If you graduate high school and you have not even a clue of what you want to do,

you're not even liking school right now. Then there's nothing wrong with going into the workforce and really, again, comes back to living with intentionality. Get out there and try different things. See what you do like. Go get a job and see if this is something you want to be in management in or see if you want to own it. See if you like clothes. Maybe you want to be. a stylist. Maybe you want to make clothes or, you know, go serve at the zoo. You know, go get a job at a zoo. Maybe you like animals. The thing with living intentional if you're going to do this gap year is you're going to be intentional for one year to really find yourself. What is it that you're very passionate about? But you're not resting during this gap year. Okay. So you're still going to be looking up grants, still going to be looking up scholarships. So that way when you get to next year, if you find something that you need education for, some of these grants and scholarships, we know all grants and scholarships. We know all grants and scholarships. will go towards a four-year or a community college. But some of them will go towards a trade school. We'll go towards a tech school.

So just make sure that we're being smart. We're learning. We're growing. And we're also still preparing ourselves for the future if college is the necessary route. And so on the topic of scholarships and grants, let's talk about specific actionable ways that people can pay for college that don't include debt. And in your book, you make a distinction between saving money versus finding money. I want to talk about both of those, but before we launch into that, can you define what the

distinction is? Finding money means you go out there and you find money via like scholarships or grants, church, a local community, someone that is giving away money to help you go to scholarship. When we say saving money, saving money is more so of how are you going to lower the bill? So instead of going out of state, you're going in the state. maybe for getting the most expensive cafeteria plan, you're getting the less expensive cafeteria plan. So finding money is we're going to find money from outsources that's going to help me pay for college. Saving money is I'm going to figure out how can I make my college bill cheaper than what it is.

What are some tips that you recommend for how people can find money for college or for grad school? If you're a single mother of kids and you want to go back to school, there are some scholarships opportunity for you. If you are a widow, there are some scholarship opportunities for you. If you are a student, a senior of a parent that is incarcerated or maybe has died from cancer, there are some scholarships for you. There are a lot of different ways to really qualify for scholarships. And I tell people, don't get offended by the questions.

Be honest, because there are particular people in organizations. organizations that has says, you know what, we want to help specific people in this specific area. And please, please apply for everything. Because Paula, every year, just this year alone in 2019, $2.9 billion scholarships have going unused. And so this is just a very rough. To me, that's a waste of money. That if you live with intentionality, if you're willing to put into work, you can find the money, but you have to be willing to do that. Go to your local bookstore or go to

Amazon.com and find this book called the Ultimate Scholarship Book and look for the year 2019, 2020. They have nearly 40,000 plus scholarships. It's a big book and you'll be able to go there and see what all you qualify for as well. But get this book every single school year. So at the end of next year, around May or June, look for the 2000. 2020, 2021 version, because these are all scholarships that are available for that particular calendar year. These scholarships are available from anyone in high school all the way up to 70, 80 years old. You can find all kinds of scholarships there. Make sure that you're maximizing on ACT and SAT scores. Go back and take those often because you want to go ahead and get the best score in

each section because it's called super score. And so if you can get the best scores, I've seen students, if they go up, then get two more points. They go from a partial scholarship to a full ride just off of two points. So maximize your ACT and your SAT scores. Let's talk about the process of applying for scholarships, because oftentimes you can get bogged down in, you know, you're trying to complete 75 different scholarship applications. Each one has a different set of criteria that you need to fulfill in order to submit the application based on its requirements. How do you methodically manage all of that? Well, here's the thing. Most scholarships are not going to be. So let's say, for example, you have 75 scholarships. All 75 of them are the process to apply will not be 100%

different. And so let's say out of 75, I say you may have maybe six, seven different type of categories. This is what I recommend to young people and actually all people. I want you to sit down and I want you to write an essay, write three different essays because a lot of these scholarships will require an essay of why should you win the essay? Or if you get this scholarship, what are you going to do with the degree? And so what I recommend is write something, build a resume out. Some of them just require a simple resume. Some of them even require some detailed answers. But you will be able to use the essay version often. You may have to go in there and kind of change out of different words to fit that particular scholarship, but get creative. I know one group of people at my local church in Florida, a bunch of

mothers. It was actually three of them, not a bunch of them. Three single mothers got together. And they all three wanted to go back to the same school at the same time and graduate during the same time. And so they all got together every single Saturday. And they all filled out scholarship applications together. When one filled one out, the other was filling another one out, then the other one was filling another one out. But then they will switch it up. So they will give them, hey, here's the essay for that or here's the answers for that. Put your name in there.

Put myself in there. Put this there. They were working together. So find different ways to do that. But just get creative. Make sure that you're not applying for scholarships at $10,000 and higher up front. I want you to apply for everything that's $5,000 and less because you have a better chance at winning those because the $10,000, $15,000.

and 20,000, everybody and their mama's going after those. But if you can get 25,000, scholarships, that's $25,000. That's going to pay for an in-state school for at least two and a half years. So get creative with that. Use as many, many duplications as you can with, of course, changing out the words. And then don't do it by itself. You know, get a team of people who are going back to school and you all work together. So what I'm hearing from you is, number one, create a couple of templates of essays that a lot of different types of scholarship applications are going to ask for so that you can reuse those base templates. And number two, work with a group of people so that you've got some accountability buddies. And then number

three, look for scholarships of $5,000 or less because there's less competition. And a lot of those scholarships are the ones that end up going unused. I am almost for sure. The majority of the $2.9 billion this year are scholarships that are 500,000 that just were not used because people didn't see them. They were going after the 25 full rise, which is great. I still wanted you to go after those, but let's attack the small ones first. If you have to choose between putting more hours into some type of part-time work versus using those hours to apply for scholarships, which is the better use of time? Depending on the age bracket, if I'm talking to a high schooler, then I'm saying the better use of your time is going to be looking up scholarships. I'm not opposed to working. I would love young people to work at least 10 hours while they're in high school.

If you are a college student, I wouldn't say that neither one is better. I would say that they both are just as equal. Working 10 and 19 hours per week is immediate cash. And if you go to an in-state school, because the average in-state schools don't cost you about $10,000. And if you go to an in-state school at $10,000 a year, if you're living at home, eating at home, that's about $8333 a month. So if you're working part-time, that's immediate cash to go ahead and pay that bill off. But while you're working, if you are spending at least an hour, two hours every single day, looking up grants and scholarships, I've seen people make on average after they get the scholarships back about $500 an hour because they were looking up scholarships.

So if you're an adult in college, I say both of them are just as equal. If you are a high school student, if you have a high school student, I would say spending an hour every single day looking at grants and scholarships is more important. For the people who are listening to this who are parents who are encouraging their kids to apply for scholarships and the kid is maybe a senior in high school and just isn't doing it, they're not motivated. What do you do? You know, I do believe in tough love. If the child is not willing to put into work, the parents do not need to put into work. I believe that if my son says, hey, I want to go to college, but I'm not going to look up scholarships. I'm not applying for anything.

Then I'm going to tell them, well, hey, you're going to go to the college so you can get into with that mentality. Because I'm not going to stress. I'm not going to sacrifice and waste my hard earned money. And I'm not going to allow your mother to do that. And so it goes back to making sure that they start taking ownership. I haven't met an 18-year-old. I haven't met a senior or a junior yet that says I'm a grown person. Like every single day I see these young people like, I'm grown.

I'm a grown man. I'm a grown woman. Okay, cool. It's time for you to act like it. And so if they're not doing that, if they're having a hard time with their senior looking at grants and scholarships and different opportunities to help pay for their college experience, to me, that's sending a message that they really do not want to go to school.

And so I'm going to advise a parent to not, to not help them out. And they're just going to be stressed on their own because I believe it's their responsibility to take the lead. And it's my responsibility to help them do what they want to do. Other than applying for scholarships, what are other ways in which people find money for college? Another way to find money for college when it comes to scholarships and grants, look for some different jobs that are offering college assistant programs. You know, you have jobs like Chick-fil-A. You have jobs like In-N-Out Burger out on the West Coast.

you have Chipotle who just actually rode out with a debt-free degree program, just like Starbucks. So I think he was about to go there. You know, it's just like a lot of these employees are offering you can come get a job and we're going to pay for your education, which I think is a great deal for 18-year-old. If you do not have the financial resources, if your parents are able to provide and help for you to get into school, why not go work for Starbucks? Starbucks are you going to learn customer service? you're going to learn how to make some amazing coffee and you're going to collect a paycheck and you're going to get their free education. And so look for different companies that are willing to hire a high school student like Starbucks,

like Chipotle, who are saying, you know, we'll help you pay for your four-year degree so you do not rack up debt to maybe you can even come back here and be a manager. But if not, go off and do your dreams. So you can find some money that way. Would that be a good option for somebody who's in their 20s or 30s, they want to go back to school, maybe to complete a degree. Yeah, that's a good option for anyone. I don't care if you're 50 years old, 60 years old.

If you retired and you want to go back to school but you don't want to pay the money, why not go work for one of these companies for four years and help people smile and, you know, and you're getting education at the same time. It's a great opportunity for anyone and everyone who desires education. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size.

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And, of course, holiday decor, all the stuff to make your home a great place to host during the holidays. You can get up to 70% off during Wayfair's Black Friday sale. Wayfair has Can't Miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home, so I got tons of shelving that's in the entryway, in the bathroom, very space saving. I have a daybed from them that's multi-purpose. You can use it as a couch, but you can sleep on it as a bed. It's got shelving. It's got drawers underneath for storage. But you can get whatever it is you want, no matter your style, no matter your budget. Wayfair has something for everyone. Plus they have a loyalty program, 5% back on every item across Wayfair's family of brands, free shipping, members-only sales, and more terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-A-I-R.com. Sale ends December 7th. So let's talk about saving money for college. One of the ways that you discuss is completing a bunch of credit hours while you're still in high school through AP classes, dual enrollment, and testing out of

classes through the KLEP exam. Huge fan of that. So if you do KLEP, let's say for an example, the average student who actually goes through the program and completes a KLEP process will go in there with either within their first year or the sophomore year or the second sophomore year. So if the average in-state school is costing you $10,000, that just saved you $10,000. If you was going to a community college, that just saved your average $5,000. And so Klepping is amazing. Dual enrollment courses are absolutely amazing. If you take and really take advantage of the ACT, SAT scores, if you really start prepping for that your freshman year, start practicing for that.

And as soon as you get into your second semester of your sophomore year and beginning of your junior year, and you start really taking those classes, not classes, but tests as often as you could, you can really save a lot of money there. because you'll be giving scholarships. And so that's just another creative way to pay for and to save money on your college campuses. But you know, another way is step back and do the research. Another way to save money is to accept the fact that you do not have to go to Ivy League School

to be successful. And what I mean by that? Why go to an Ivy League school to get a business degree when you can go to this local in-state school and get the same degree but cheaper? prime example in the state of North Carolina, if you go to UNC Penbrook, which is not of a huge popular school. They're not really known for their basketball teams or their, you know, football teams, but it's a solid four-year education school. They are accredited, a very bright school, but they only charge $500 semester to every student that gets accepted into their school.

So that's $1,000 a year, $4,000 to get your bachelor's degree in business. So another way to save money is to actually consider a different than not so popular schools, but understanding that the school does not make you. If you're smart, you're smart. If you're going to graduate with hard work ethic, character, and if you live with intentionality, and if you're willing to put into work, you will be successful. Would that make an impact in terms of the type of network or connections that you have access to through the alumni network and the people that you meet, the professors that you work with?

I had a meeting with one of my mentors, Mark Cuban, and I asked them that same question. I get access at all the time. Well, I disagree with you because if I go to Harvard and there's nothing else going to Harvard because actually Harvard provides a lot of resources for minorities and less fortunate individuals. So I love Harvard. I love Yale. I just do, I don't like debt. And so I want you to avoid debt.

But when it comes to your network of individuals, I do believe that, different schools provide different networking opportunities. But it is the individual that keeps the person inside of the door. So just because Mark Cuban got me in the door here, it doesn't mean that I'm set for the rest of my life. It is my character. It is who I am that keeps me in that door. And it's also who I am that can get me to the door. So there are different opportunities with every single school that you go to.

But we cannot say that spending $100, $200,000, $300,000 in student loan, that is worth a presentation. I've met several lawyers, several doctors who did not graduate from Ivy League schools, who are just as successful and are debt-free because they went the more affordable route and they went the best route for their future. On the topic of attending a more affordable school, one of the suggestions that you make is attending a community college for the first two years and then transferring.

Can you talk about that process and what are any red, flags to look out for if a person were to choose that? Yeah, I mean, I'm going to say this up front. Not every community college is a great option, okay? Just because it's an affordable car, it may not be the best car. Just because it's cheap, it may not be the car that you need to purchase because you may break down the next week. So I always say, before you go to the community college, just make sure you do your research, make sure that they have a good transfer program, they have a good transfer rate, that the classes are accredited in most of your in-state schools or whatever school you want to go to will accept those credits.

And so go to that community college if all those things pass. Now, if you get some red flags, oh, man, the transfer rate is horrible. Man, my school will not accept this program. Then we need to actually look at a different option. Every state should have several community colleges around the state that we can look into. But there's nothing wrong with going to a solid community college. Like I said, I was with Mark Cuban earlier and he said, I don't care where you start. It's like, I really don't care where you finish. I just want to know, do you have the education and do the job? Are you willing to put into work? Are you willing to put into work to not just put into work, but to be the best at it? And are you going to show up every single day and do what you need to do? If you can do those things, I don't care if you graduated from Harvard. I don't care if you started off at Fayetteville Tech University. I don't care if you graduated from UNC Pembroke. I care about who you.

you are. And I've met several millionaires that said, I actually like the fact that they started off at a community college and transferred to an in-state school and graduated with no debt because they can come here and work for me. And I don't have to worry about bill collectors calling my office. I don't have to worry about them asking me for a pay raise or asking me for a loan because they are financially stable and they can focus on their job. So the practical steps is to go to community college for the first two years. While you're there, I'm when you're looking up scholarships and grants. If your dream is to go to Yale, great. Let's figure out how can we do that debt-free?

What are the processes? What do I need to do? If your dream is to just transfer to the local and state school, that's great. Make sure that we're applying for scholarships, applying for grants, and we're building relationships with the professors and teachers and financial aid offices on the community college and at the school that I want to go to. Start asking them questions ahead of time. Hey, I'm coming here next year. What do I need to do?

How do I need to apply? When do I need to apply? what can give me an actual an advantage over some of the other students? What are they doing that I can be doing, I mean, working on right now? So get creative with that process and you will be successful there. For people who are able to live at home while they're going to school, the advantage of course is that you don't have to pay for room and board, but oftentimes living at home does require that you support the cost of a car,

car insurance, gasoline, and that's a lot to pay for when you're simultaneously also paying for tuition and books and some food. How would you balance all of that? I mean, does there come a point where, you know, because you don't want to take out a car loan either. So just how do you come up with that level of money in your early 20s? Well, let's step back into the math. The very first thing, before we say this is massive. It doesn't have to be massive. That is the message that I'm trying to deliver to people. You're going to have a budget. That's the very first thing you're going to have.

And so if you are 18, 19 years old, you're not driving a car that is worth $15, $20,000. You are driving a car that you paid for cash. And so the average 18 and 19 year old should be or will be on their mothers or their parents' insurance. So now we have a car payment out of the way. car insurance is not there. If you're living at home, so the most thing that you're really paying for as a student, I believe it's your gas, maybe a cell phone bill. And then you have $8333 to say on average if you go into a school that's costing you $10,000 a month.

And so this means if we really do the budget and we lay everything out, I'm saying you should be somewhere around $1,200, $1,300 a month. Now, keep this in mind. I didn't say that the student should be paying for all of it. What I am saying is that they should be filling the weight. I am not against parents helping. Dave Ramsey helped all of his kids. I will help my kids to make sure that they can focus on their education without filling as much weight to where it distracts them from performing well while they're in school.

But my son or daughter will fill a little bit of weight of like, okay, I need to do well here because I have some sweat equity in the game as well. So the going to college experience doesn't have to be massive when it comes to your income. If your budget is, I only can spend $15,000 a year for everything, then you need to find a school experience that you can do that. And there are several options out there to do that. If your experience is, your budget is I can spend $30,000. Cool, great. But if your college experiences is, you know what, I only can spend $7,500 to live comfortably.

You can do that as well. It's just about setting a budget and do not go over that budget at all. Yeah, it strikes me. You started the answer by saying, you know, a young person's not going to drive a $20,000 car, which obviously, of course, they're not. But even a $4,000 car, if you're making $15 an hour, that's 266 hours of work just to buy that car. Yeah, yeah. And that's only one of the items that you have to purchase in addition to buying textbooks and paying for tuition. I certainly see how taking a gap year would allow you more time to be able to save that money.

But beyond taking a gap year or having your tuition covered by scholarships, again, just seems like a lot of money relative to your income. Yeah, I totally understand what you're saying there. And what we have to do is really just step back, right? Ask ourselves this question. The main priority is going to be on the kid. but you have the guidance and the wisdom and support from the parent. So you're right. Let's say the car costs $4,000.

You know what, son? You know what, daughter? You buy the car. I'll pay for your first three months of education. After that, you need to chip in 25% of this bill. So it's all about getting creative and making sure that the young person has some weight in the game. If they want to go to school and they want to drive a $4,000, $5,000 car, make sure that they pay for it. I encourage that the high school students, save up and pay cash for your first car.

But then after that, do not let them slide. All right, now you're going to school. The bill is cost me about $850 a month. I need $250 from you. If you're working minimum wage in certain states is right around $13, $250 a month. That's going to be about one week's worth of work. All right? So that means one week's worth to work.

You're going to be this. You're working to pay a part of your college experience. As a matter of fact, you pay this, but you need to buy your books. Okay, yes, mom, yes, ma'am. Yes, sir, I'll do that. That's a book's going to average them cost you anywhere between $2 to $1,000 depending on one semester. I mean, you've got to say for it the semester before. So it doesn't have to be massive if the two are working together, but again, the weight is still on that child just as much as possible.

Right. What about the people listening to this who are in their 20s and they're supporting themselves? See, now, if you're in your 20s and supporting yourselves, this means your income is not as high. If your income is not as high, there are several opportunities that you can go after when it comes to grants, when it comes to scholarships and when it comes to schools. There are several schools that have your income is less than $45,000 to $50,000 a year. They will actually give you a massive discount and sometimes free education. Prime example, that's just like UNC Penbrook. there are three colleges in the state of North Carolina that is only $500 a semester.

We have several colleges here in the state of Tennessee that the first two years here, you can go to community college 100% free. And so there are several options. But Paula, the question is that I think a lot of people failed to really ask is, Anthony, okay, I agree, there are options. But they're not popular. Like, these are not attractive school programs. What do you say about that? My answer would be, I agree. I agree. Did not ask popular,

but are you going to school to go to a popular school? Are you going to school to get the education so you can be the best individual that you possibly can in the future? If your answer is the second, it doesn't matter about where you go and how you go. It just matters about, are you going to graduate debt-free? Do you have the education to come out and be successful? Right. So the thing that you said about them taking your income into account if you're not making very much money. That applies once you're age 24 or older. So if a person has to put themselves through school, should they wait until they're 24 to go to school because that's when their income is going to be considered if they're not getting help?

If you're on your own and your parents are not involved in your life, there are some paperwork that you can do to make sure that your income is taken into account because you are actually on your own. There are several programs out there and there's a process you do have to fill out some paperwork for. I forgot the name of it offhand. But your income can be taken into account. If you are filing your own taxes, you can go to school and have your school.

Look at your taxes for that. If your parents are claiming you on their taxes, then yes, you have to go through that. So it really goes back to if you're on your own, you can take your income into account. If you're still connected to your parents and your parents are claiming on their taxes, on their taxes, then yes, we need to include your parents' income and attack it that way.

We're coming to the end of our time. Are there any final takeaways that you want to leave the audience with in terms of getting through school debt-free? Yeah, just to recap the five things. Well, number one is take debt off of the table. Make sure that once you take debt off of the table, have a vision, have a goal, see where you want to go, what do you want to do? How do you want to do that? And then, like you said earlier, we're going to work, save, and behave. We're going to work at least 10 and 19 hours a week. We're going to find some money, save some money in school. And they're just going to behave. When we get into school, I don't want you to work so hard to where you've got these scholarships, you've got this amazing job, you have this amazing opportunity to get an

education. I want you to make sure that you value that and do not do anything that can jeopardize you losing a scholarship, losing a job, or losing the school experience, like how I did. I lost everything because I wasn't behaving in school. And so if you do those five things, along with some other small things, you will be successful. You can graduate debt-free and your future will be brighter than others. Thank you, Anthony. Now, let's go into some more detail about some of the topics that we discussed during this interview. And we'll start with the last topic that we discussed, which is qualifying for financial aid based on your own income rather than your parents' income. This is one of the best ways to receive need-based aid, such as federal Pell grants and

qualifying for need-based scholarships. Now, here's how the process works. The FAFSA, which is the document from which all of your federal aid will be judged, it's the free application for federal student aid. The FAFSA will consider you as an independent and will consider your income rather than your parents' income. If you meet one of the following criteria, you need to be age 24 or older, or you need to be married, or you need to have dependents other than a spouse, so for example, if you have a child, or if you're a graduate student, or if you're active duty with the armed forces or a veteran with the armed forces, or if you are a child in the foster care system, or if you are homeless, those are the conditions. Those are the conditions.

under which the FAFSA will consider you as an independent student. Some people mistakenly believe if you are financially self-sufficient, meaning that you live on your own, you pay your own bills, then that's enough to be considered independent. It is not. Even if you file your own taxes and even if you are not claimed as an exemption or as a dependent on your parents' tax returns, that by itself is not enough. for you to qualify as an independent student in the eyes of FAFSA. The FAFSA will consider you as a dependent for federal student aid purposes, even if you're filing your own taxes.

And I want to make one other thing clear as well. A court order that terminates child support has no bearing on FAFSA viewing that child as an independent adult for federal student aid purposes. However, and this is where it gets a little confusing, there is a different concept which is called an emancipated minor. According to the Higher Education Opportunity Act of 2008, it is the law, it is federal law, to treat as independent any student who becomes an emancipated minor prior to turning 18 or reaching the age of majority. And so if a student, before they turn 18, becomes an emancipated minor, then they are viewed as an independent for the purposes of federal student aid, which means that their own income rather than their parents' income is what can be used on the FAFSA. Now, being an emancipated minor is not the same thing as a court legally emancipating a child or a young adult. from child support obligations paid by another parent. In other words, even though the courts may use the word emancipation,

we're talking about two different concepts. One is the concept of an emancipated minor, and that emancipated minor becomes, in the eyes of the courts, an adult who is able to sign contracts prior to reaching the age of 18. That is the concept of being an emancipated minor. That designation has to happen when you are a minor. If you're an emancipated minor, then you can use your own income when you apply for the FAFSA rather than your parents' income because you are a fully emancipated minor. You are in the eyes of the law.

You're an adult. You sign your own contracts. You take care of yourself. You essentially have the rights and responsibilities of a person who has reached the age of majority, even though you are still under the age of majority or still under 18. Right. Under that set of circumstances, you are regarded as independent. However, that is not the same thing as being legally emancipated for the child support purposes. And that is a distinction that can be very confusing because oftentimes the same words are used when talking about these two concepts.

So, long story short, if you're an emancipated minor, then sure, you can use your own income. Other than that, in order to use your own income to apply for federal student aid, in order to be able to be able to be able to, in order to be viewed as an independent student, you need to either have a dependent. So if you're 19 or 20 or 21 and you have a child, then you would be seen as an independent student. So you need to have a dependent or you need to be married, you need to be age 24 or older, or you need to be in grad school or active duty or a veteran of the armed forces. You need to meet one of those criteria. And simply the fact that you take care of yourself, you pay your own bills, you

file your own taxes, that is not sufficient to qualify you as an independent student for the purposes of receiving federal student aid. So with that foundation established, that leads to some of the tips and strategies that people can use. We're going to take a quick break for a word from our sponsors, and when we come back, I'm going to share five specific strategies that people can use to get through college debt-free. We'll be right back. So tip number one, you could wait until you're 24. If you are putting yourself through school and you want to qualify for financial aid

based on your own income rather than the income of your parents, then there's a strong argument to waiting until you're 24. And in the meantime, between when you graduate from high school and when you turn 24, taking or testing out of various classes such that once you're 24, you'll have the bulk of the first two years completed and then you can finish out your junior and senior year between the ages of 24 and 26.

And this strategy would allow you to, by age 26, finish your degree completely debt-free. Now, for the rest of this tip and for the next tip, I'm going to go into detail about how this strategy would look. But before I do, here's an example. If you listened to episode 139 of this podcast, which you can find at afford anything.com slash episode 139, We interviewed a firefighter by the name of Kim. That was how she was able to go to school, put herself through school. Prior to the age of 24, she made good use of her time. She was an AmeriCorps volunteer.

AmeriCorps is a federal voluntary civil service program that allows people to do public service work and help communities in need across the United States. So she was an AmeriCorps volunteer for a year. she completed some college courses so that when she went in she wasn't starting from scratch, she already had some coursework under her belt, and she worked a handful of jobs. So she was able to save money, try a handful of different fields, figure out what she wanted to do. And then at the age of 24, she could enroll in school and finish out her degree while qualifying for excellent federal aid because her FAFSA is based on her own income. and also, quite honestly, with a greater degree of maturity and a greater sense of what she wanted to do,

because she had already put in that time up front into exploring different careers, serving in AmeriCorps, trying out different fields. So when she did go into college, not only was she able to qualify for excellent need-based aid, but also she was focused. That's tip number one. And when I say wait until you're 24, that doesn't mean that you have to start. four years from scratch on your 24th birthday. You could take AP classes while you're in high school. You could take the Klep exam in order to test out of a handful of classes. You could take community college courses. You could take online classes. You could finish out the first two years of school piecemeal through a combination of AP courses, clep exams, and community college classes and online classes. You could finish that out before you're 24. And then that way, when you turn

24, you'll already have your freshman and sophomore year under your belt, and then you go in and you finish out your last two years. You're done at the age of 26 with a four-year degree, completely debt-free. So that is one possible way to do it. Number two, let's elaborate a little bit more on some of the mechanisms that I just named AP classes, the Klep exam, and dual enrollment high school college classes. So we'll talk about all of these, starting with AP classes and dual enrollment classes because these are two types of classes that you'd be taking while you're in high school. AP stands for advanced placement. Many high schools offer AP classes in subjects like biology, psychology, history, chemistry, physics, English. So you take an AP class

in your high school, just like you take any other normal high school class. And at the end of the year, you take what's referred to as an AP exam. And if you pass that exam, then you are awarded college credit, typically three credit hours, for the equivalent class that that would have been if you were to have taken that class as a college freshman. So, for example, when I was in high school, I took AP history, I took AP bio, I passed both of those tests. And as a result, boom, those were six credit hours that I'd already completed before the end of my junior year of high school. Now, here is the fun trick that not a lot of people know about. You don't actually have to take the AP class in high school in order to receive college credit. You can just take the AP exam, and if you get a passing grade, a lot of colleges will count it.

So I did that with AP psychology. I never bothered taking the class. I just took the exam. I got the textbook, read it on my own, took the AP exam, passed it, and boom, just like that. I got three credit hours for intro freshman level psychology without ever even bothering to take the class in high school. So for those of you who are listening to this, who maybe you're in your 20s and you want to go back to school and you're trying to figure out how you can get a bunch of credit hours under your belt for free, that's a great way to do it. Just take a bunch of AP exams. And if you get a passing mark, a lot of colleges will accept that.

Now, of course, every college has its own policy, so check with whatever school you're planning on going to. But many colleges have a policy in which if you score a four or a five on an AP exam, so the AP exam is graded one through five. And if you score a four or a five, then they will give you credit for having taken that class and exempt you from that introductory coursework. And on a college transcript, this will usually appear as either just a P for, for pass or a CR. So on your college transcript, if you see the letter CR, you've gotten credit for it. It's not going to count towards your college GPA, but it will count towards the number of credit hours that you need in order to graduate with your diploma. So using the AP exam to essentially test out of a lot of introductory classes for free or for the cost of the exam is a great way to do it.

And similarly, the Klepp exam, Klep stands for college-level. level examination program. The Klepp exam is another one that you can take in order to test out of classes and receive college credit for these classes. I did this with an introductory sociology course. I got the textbook, read it cover to cover in the span of one weekend, and I took the KLEP exam on Monday morning, passed it, and then boom. That was one fewer class I had to take. I got three credit hours just for a weekend of studying. So remember, you can take the AP exam and take the KLEP exam without actually taking the class. I have done this with both of those,

and it is one of the best ways to just rack up a whole bunch of college credits for an insanely low cost, for the cost of registering for the exam. There are 38 different types of AP classes out there, meaning 38 different AP exams. So you could use this tactic to cover more or less your entire freshman year in a big chunkier sophomore year as well. I mean, you can, if you were sufficiently self-motivated enough to self-study and then test out of these, you could test out of most of your general ed requirements. A few important things to know. Number one, there's no penalty for failing one of these

exams. If you take an AP exam or a KLEP exam and you do not get a passing mark, you will not be penalized, it will not show up on your transcript as an F, nothing will happen. So you can take the AP exam, and as I mentioned, that scored 1 through 5. If you take the AP exam and you get a 2 on it, no big deal, you will not be penalized for not passing the AP exam. And you can take it again. So for example, if you decide to take the AP history exam, the first time you take it, you get a 2, you can re-register, take it again. And then if you get a 4 the second time that you take it, then that's fantastic. That four, which is that passing mark, will count for college credit. So you won't get punished for failing and you can retake the same exam as many times as you want to in order to pass.

Now, the big drawback is that you'll have to pay the registration fee every time you take the course. Right now, as of the end of 2019, beginning of 2020, the cost for registering for an AP exam is $94. That's the price per student for each AP exam. There are some schools that charge additional administrative fees on top of that. So check with your local testing facility to see whether or not they charge a supplemental fee on top of that. But the base price is $94. When I took the Klep exam to test out of an intro to sociology course, I was pretty relaxed because I knew that if I got a bad grade on it, nobody would ever know. If I fail that test, then who cares?

I've lost $100, but if I pass the test, then awesome, I've just tested out of a three-credit-hour course. Okay, so that's tip number two. Tip number three is that you could go to community college or take classes through an online college for the first two years and then transfer, because ultimately what's going to count is where your diploma comes from, and that will come from where you attend your junior and your senior year. So there's a big distinction between how you get your credits for your freshman and sophomore year versus where you attend that junior and senior year. And for any credits that you can't test out of, taking those credits or getting those credits under your belt through community college or an online college can be a very affordable choice. Before you go to the community college, just make sure you do your research. Make sure that they have a good transfer program.

they have a good transfer rate that the classes are accredited in most of your in-state schools or whatever school you want to go to will accept those credits. And so go to that community college if all those things passed. At this point, we've talked about how to essentially get half of college, your credits for your freshman and sophomore year, more or less for free, through a combination of community college online courses and just testing out of as many classes as you possibly can through the AP and Klepp exams. Now let's talk about how to shave off the cost of your junior and senior year.

And for that, we'll go to tip number four. Find out what your school's policy is with regard to the number of credit hours that you can take for the same price. And here's what I mean by that. There are many colleges that will let you enroll in between X number of credits and Y number of credits for the same flat price. So, for example, when I was at the University of Colorado Boulder, at the time that I went there, you could take between 12 credit hours to 18 credit hours per semester for the same flat price.

At that time, if you went above 18 credit hours in a semester, they would start charging you extra. And if you went below 12 credit hours, you were charged at a different tier because then you were considered a part-time student rather than full-time. But anywhere in between 12 to 18 credit hours was the same flat rate. So, you can guess what I did, I took 18 credit hours. It was illogical not to. In fact, first semester of my freshman year, I took 19 credit hours because I was in a particular scholarship program that required this one additional credit hour course that I had to take. So fall semester of my freshman year, I was enrolled in 19 credit hours, which triggered that extra fee. And then every semester after that, I took 18 credit hours.

So between that and the AP exams and the KLEP exams, I finished school in seven semesters. And by the time I was done with seven semesters of school, I was considered a fifth year senior. So I had the equivalent of having gone to school for five years, even though I was done. I completed that in seven semesters, which, by the way, I didn't have to. I was so far ahead of the game, I probably could have pieced out. But I was really trying to graduate summa cum laude. And so my senior year, I just piled on as many easy classes as I could in order to try to drag my GPA up in an effort to graduate suma. I didn't make it. I graduated magna cum laude. But that's the kind of stuff that you can do senior year. When you have that leeway, you can do. you can decide if you want to hang around longer and try to game the system in order to get your favorite Latin designation, or you can decide that you want to just piece out early and start working. That's the type of flexibility that you get as a senior when you've already done the hard work of taking a heavy course load so that you can get the most of what you're paying for.

It is more rational to take as many credit hours as you can in one day, given semester, and then if you need to take the entire next semester off in order to work full-time so that you can cash up, like it's more rational to do that than it is to pay for both semesters. Finally, tip number five, and this ties in with what we're talking about, take a gap year or take a gap semester or take a gap few years and use it to save up money. Here's what Anthony had to say about this. You're going to be intentional for one year to really find yourself. What is it that you're very passionate about?

But you're not resting during this gap year. So you're still going to be looking up grants, still going to be look up scholarships. So that way, when you get to next year, if you find something that you need education for, some of these grants and scholarships, we know all grants and scholarships will go towards a four-year or a community college. But some of them will go towards a trade school. We'll go towards a tech school. Just make sure that we're being smart. We're learning.

we're growing and we're also still preparing ourselves for the future if college is the necessary route. Regardless of your strategy, whether you are taking the approach of doubling up on classes in one semester and then taking the next semester off to work, or whether you're taking the approach of slowly completing your first two years through a combination of community college, online courses and AP and KLEP exams, do that until you're 24. and then go in for your last two years starting at the age of 24, or whether you're taking the approach of simply taking one gap year right out of high school and then going in when you're 19 instead of 18. But this time with more savings under your belt because you've had a year of full-time work in the workforce. Like regardless of which of those strategies you choose,

all of them in one way or another are variations of taking a gap year or taking a gap semester or taking a gap few years. Essentially, this allows you to take the time that you need in order to save the money that you need to pay your bills. So those are five takeaways or five tips for how you can hack the cost of college. Thank you for tuning in. If you have any additional tips that you want to share, head to afford anything.com slash community. That's afford anything.com slash community. It's where we all hang out to chat about every episode and to talk about anything ranging from paying for college to paying off debt to side hustles, real estate, goals for the new year.

So again, afford anything.com slash community. We have a contest that we are running. So we are giving away five books, all of which have been featured on this podcast during the year of 2019. So this book, Debt Free Degree by Anthony O'Neill, is one of the five. five books that we are giving away. We're also giving away emotional agility by Susan David. Broke Millennial Takes On Investing by Aaron Lowry. Stillness is the key by Ryan Holiday. And letters from a stoic by Seneca. So all five of those books, we are giving that away to one lucky winner. And you can enter that contest by going to afford anything.com slash book giveaway.

That's afford anything.com slash book giveaway. Afford anything.com slash book giveaway. Afford Anything.com slash book giveaway. Thank you to everybody who left us a rating or a review. As of the time of this recording, we have 2028 ratings on Apple Podcasts. So we are going into 2020 with more than 2020 ratings. So thank you so much to everybody who rated us or who left us a review. I want to give a shout out to one reviewer who goes by the name of Blessed Are the Animals. They said, quote, afford anything is my favorite.

financial podcast, hands down. I love her philosophy of life, and I always find bits of actionable advice in every episode. She gives a perfect blend of factual and interpretive information. I can't recommend her enough, whether you are in the FI community, interested in real estate investing, or simply trying to find a good work-life balance. Thank you so much. If you want to leave us a rating or a review, please head to Afford Anything.com slash iTunes. That's going to direct you to the page on the Apple podcast website where you can rate us or leave us a review, or just go into whatever app you're using to listen to this podcast and leave us a rating or a review there. And also, while you're there, don't forget to hit the subscribe button or the follow

button so that you won't miss any future episodes. Thank you to the sponsors for today's episode, Rothies, Fresh Books, Bluehost, and Ancestry. If you'd like a complete list of all of our sponsors, plus the deals and the discounts that they offer, you can find that at affordanithing.com slash sponsors. Thank you again for tuning in. My name is Paula Pant. This is the Afford Anything Podcast. Don't forget to enter our book giveaway at Affordanything.com slash book giveaway. And I will catch you next week.