Avoiding Student Debt With Dr. Art Rainer

Many people are using the FaithFi app to help provide the wisdom, community, and money management to stay on track, financially speaking. To date, over 37,000 members are using its digital envelope system, participating in our community forums, and engaging in virtual workshops. And one of the most convenient features is the ability to keep all your accounts in one place for an easy-at-a-glance view.

You can choose from one of three options, depending on your management style, and it's available on desktop or mobile. Go to faithfi.com and click app to get started. I'll talk about that with Art Rayner today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. We always look forward to having Art Rayner back on the program with us. Art is the director of the Institute for Christian Financial Health, the organization that certifies Christian financial counselors. Art, great to have you back with us. Rob, it's always a pleasure.

Thank you. So, Art, we promised to provide biblical wisdom for listeners' financial decisions. Going to college is, of course, a huge financial decision. So, where would you take us in Scripture as we think about preparing for college? I think Proverbs 22.7, the rich rules over the poor, and the borrower is a slave to the lender. That should guide your decision process because it's so easy to borrow and run up tens of thousands of dollars in debt that will take you decades to pay back.

Yeah, that is so true, and we hear from listeners all the time dealing with just that. Now, in your book, Art, you list four ways to minimize debt, and if you're really good at them, they could even enable you to graduate debt-free. So, why don't you share those with us? Yeah, number one is this, start saving now. The second, make sure that you are taking college-level AP courses or dual enrollment courses that are available. The third is to explore scholarships and grants, and then finally, be willing to work while you are in school. Yeah, those are really helpful. We're not saying that doing those things will be easy, only that they're easier than paying back $30,000 or $40,000 in student loan debt.

But you have another list, Art, that can make this whole process a lot easier, I think, so tell us about that. Yeah, it's a list of misconceptions that could cost you a fortune in student debt, but knowing them will enable you to avoid them. And the first one is this, attending a costly school will get you a better job. So, higher tuition does not always equate to higher salaries. Employers don't look at the amount you paid to get a college degree. They just look at your degree.

Yeah, that's really helpful, and avoiding that one could save you a ton of money. What's another misconception? The second misconception is that you need the whole college experience, right? Choosing to work to help offset tuition costs can help ensure that you won't still be paying on student loans 10 to 15 years after your graduation. And the third misconception is this, that it's okay to stretch out college. Now, certainly, there's some leniency here, but be careful when choosing to stretch your degree program. You may end up paying more, and you also run a greater risk of not completing your degree. And don't take throwaway classes, make your investment worth it. Yeah, that's great advice, whether you borrow or not.

Alright, the fourth misconception? It's that you don't need to know what you're signing. Educate yourself on student loans. Before you sign any papers, understand the commitment involved, what it will take to pay off the loan, and what alternatives are available. And the number five misconception is this, that everything will take care of itself. Student loans are stubborn things. They even survive bankruptcy. So I'm less concerned with students who feel burdened by their loans than the ones who feel no burden from their debt.

Unless you manage to get through the obstacle course of debt forgiveness programs, and that's not easy, your loans will have to be repaid no matter what. Yeah, that's exactly right. And then our time for one more, perhaps incorrect line of thinking in this whole area. Yeah, it's that there's no other option. Without question, the cost of higher education is a very difficult challenge for many current and future college students. But this doesn't mean that there aren't other options. Diligently pursuing scholarships and grants can be incredibly helpful. College costs are sky high, much more than your parents experienced when they were in school.

So be sure to look at those other options. Yeah, boy, I've been down this road, Art, and I couldn't agree more with everything you're saying. My wife, they turned their living room into a scholarship factory. She got over $100,000 in scholarships.

And our oldest took 15 AP classes in high school, so he was able to enter college halfway through his sophomore year. So this stuff works. You just got to put your mind to it. Art, thanks for being with us today. Rob, thanks for having me.

All right. That's Art Raynor with the Institute for Christian Financial Health, where they train certified Christian financial counselors. You can find out more at christianfinancialhealth.com. Your calls are next at 800-525-7000. This is Faith and Finance.

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Soundmindinvesting.org. Great to have you with us today on Faith and Finance. We're taking your calls and questions today. Looks like we have two lines open.

Perhaps one of those is just for your financial question today. You can call right now 800-525-7000. That's 800-525-7000.

Let's go to South Carolina. Hi, Wendy. Thanks for calling. Go ahead.

Hey, Rob. I just want to thank you for your ministry. I've been listening for many years back to your predecessors.

And my husband and I have been applying biblical principles to our finances for many years. And honestly, it has changed the trajectory of our lives. I just want to thank you first. First of all. Well, thank you for saying that.

I'll tell you the work that the late Larry Burkett did that didn't pass on to Howard Dayton. And now to me, I walk in some massive shoes, as you know, Wendy. But at the end of the day, well, thank you. I appreciate that. And I would have you know that what you're experiencing is the fruit of following God's life changing truth. It's always relevant.

It's always practical and it never changes. And I'm delighted that you gave testimony to the Lord today. So thanks for saying that. Yes. So my question is, we have set up an endowment at our church. And one of the ways that we're encouraging our members to give is through required minimum distributions.

You know, we do have some older members in our church. And I just wondered if there is some calculation or a chart that you could refer me to to help our members understand that, you know, if they're going to be giving to the church anyway, could they take a portion of that required minimum distribution? Whatever portion they would have to pay in their taxes, if they could instead give that to the church, is there a formula or a chart that could help me say to them, for example, if they have $100,000 that is, you know, their required minimum distribution, what portion of that would they be able to give to our church and offset their tax impact? Yes. So you're trying to give them essentially an estimate of the potential tax savings by not having to add that withdrawal to their taxable income for the year?

Correct. And of course, I know it would be dependent upon their tax bracket and that sort of thing, but I just wondered if somebody's come up with that chart. Well, you know, one approach would be to essentially use your effective tax rate.

And so you can calculate your effective tax rate using your most recent return by taking your total tax, which is line 24 on the 1040, and then dividing that number by your taxable income on line 15. And that would essentially give you the rate at which you're being taxed. And then as a kind of a general practice, you could apply that to whatever that qualified charitable distribution amount is that's coming out.

Because now it could be more than that. That's kind of a minimum in a sense, because to your point, it could push them up into a higher bracket. But at a minimum, they would save that amount, which is their effective tax rate, because that's essentially probably at a minimum at what would be applied to the amount that they would have had to pay on that withdrawal from the IRA, that they're not having to pay because they're sending it directly from their IRA to the church for the endowment.

So I think that could be just kind of a general practice, or you could say, you could just give them an example. So you could pull up the 2024 tax rates if you didn't want to do their effective tax rate. And you could just say, you know, for most people, they're in a 22% bracket. And so hypothetically, if we apply 22% to this gift, you know, that's essentially the amount you're saving by not having to recognize that as income. The other thing that folks may not realize is that if they were planning to give to the endowment anyway at the church, and they were typically going to do it, like most do, out of cash or out of savings, after tax accounts, they could replace it with the same amount, so we're not even necessarily asking them to give any more, but coming from the IRA.

And then again, it's the only way for them to get that money out of the IRA without ever having to recognize it as taxable income. And one of the benefits there, which you've already mentioned, is that at the same time, they were satisfied that required minimum. So, you know, hopefully those are some talking points that may help you. Okay. Well, thank you. I appreciate that insight. And thank you again for your ministry.

Well, thank you, Wendy, and Lord bless you. And how are you guys doing on that endowment? Are you just getting started? We're just getting started.

It's a slow go. Yes. Well, that's great. We're convinced it's something the Lord would have us do. Yeah. And we just want to be sure that our ministry of our church continues for a long, long time.

Yes. And we think this is one way to do it. So, again, thank you.

You're welcome. I'll just say in conclusion here, just don't ever forget, money follows ministry. And so you want to cast vision around how God is allowing you to reach people and see lives changed as the primary objective. That's what people like to give to. And then I think the other thing is just whenever we're talking endowments is to balance getting that money into God's economy today and allowing it to flow through the church versus being there for the future.

I think both are good, and I think it takes prayerful discernment on the part of the leaders to determine what is the right mix of now and later. And certainly what you're doing is a good thing. So we'll just ask the Lord to give you all some favor. But thank you for your kind remarks and for calling the program today. May the Lord bless you.

To Chad Anuga. Hi, Linda. How can I help you? Hi. Thank you for taking my call.

I was calling. I'm currently still working, scheduled to retire within the next couple of years, I guess. And so I am my employer has an actual person that manages our retirement plan. But I was trying to find out how I could invest in things that line up more with my faith and make sure I'm not supporting something that I don't want to be supporting. Yeah, it's a great question. So do you have an advisor that you work with right now, or are you currently making investment decisions on your own?

No, I have one I'm working with. That's why I was asking. So because I was thinking about planning a meet, sit down and talk with them. And I was wondering what to look for. Very good.

So it's a great question. And there's a wonderful opportunity, Linda, that didn't even exist, you know, three or four or five years ago where there are now world class award winning investment options, both what are called and I don't want to get too technical, but exchange traded funds, mutual funds, even advisors that manage stock and bond portfolios. All of those are available with a faith based approach where they would screen out companies that are misaligned with your values as a believer, and even look for companies that are going to generate, you know, compelling value for shareholders, but also that are promoting human flourishing.

So there's two ways you can go if you have an existing advisor that you're working with, you're happy with that relationship, great. What you may want to do is download a free PDF that's a listing of all of those faith based investing fund families. And you could take that into your advisor and say, Hey, I would really like to invest in a way that's aligned with my values.

Will you check these out? And where you would get that is on the website, faithandinvesting.com. That's faithandinvesting.com. And you could download that free PDF and take it in that's from our friends at the Center for Faith and Investing. The other approach is you could find a certified kingdom advisor who offers faith based investing if you wanted to make a change. And you would do that on our website, faithfi.com. Click find a professional. And as you answer the questions, you'll be able to say only show me CKs that offer faith based investing. I think one of those two will get you pointed in the right direction. Thanks for your call.

Folks, we're going to take a quick break here. Lines are open 800-525-7000. Let me mention if you want to support the broadcast, we'd certainly be grateful with a one time gift of $25 or more. We'll send you our new four week study rich toward God that you can use for your own edification or with a small group. Just go to faithfi.com and click give. Much more just around the corner.

Stay with us. Where you can ask questions, get answers and share what you're learning. Go to faithfi.com and click the word app to get started. Frustrated by your health insurance, confused by the network restrictions and increasing premiums?

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Hi, Rob. My official status is retired, although I do work as a temp, so I haven't made any contributions into my retirement account for three years or so. I haven't taken any distributions, though, and some very financially savvy friends of mine were saying that to safeguard these funds from the ups and downs of the market, I should take everything out of my 503B and create a CD ladder. But I said, wouldn't that result in a huge tax burden if I move all those funds out of my retirement accounts and put them and create a CD ladder?

And they said, no, no taxes. So that's very puzzling to me. Well, what they may have been referring to is the fact that you can buy CDs inside of a retirement account. Often what they're called as brokered CDs, if you're using a brokerage firm, or you may have a retirement account at a bank or some other firm where you can buy the CDs directly.

But there's two different things going on here. We have the type of account, which is either taxable or pretax. And the retirement accounts are, of course, pretax.

And that would be 403B. 401Ks, IRAs, and then they're separate from the type of account, there's the investments in the account. And that could be CDs, it could be stocks, could be bonds, could be mutual funds. And so in your 403B, if you've separated from your employer, you could roll that out to an IRA. That's not a taxable event, because it keeps it in a pretax environment. And then you could turn around and buy CDs inside the IRA. I think the bigger question is, what is the right investment strategy that's appropriate for your age and risk tolerance goals and objectives? But let me stop there and just see if that clears it up for you.

It does. So I imagine they were talking about working within, I'm with TIAA, so not right. So I understand now you're saying I'd have to move it into an IRA and then use that to buy CDs through TIAA where all my accounts are. Yeah, and even, you know, TIAA brokerage offers certificates of deposit.

And so you could very likely buy CDs even inside TIAA, inside that retirement account, you would just need to contact them about that. And what do you think of that strategy in general for safeguarding the funds from the ups and downs of the market? Yeah, I don't think it's a good one for all of your money in the sense that, you know, those those CD rates that are fairly attractive right now are only temporary. So as the Federal Reserve starts to lower the Fed funds rate, then those CD rates are going to fall. Now, when's that going to happen?

Well, no one knows. But it's probably, you know, the Fed is saying that they're going to start lowering rates before the end of the year. And that will likely continue through the next year because they're going they can't leave them this high for very long, or it's going to really start to continue to slow down the economy and will slip into a recession. So as those rates come down, the CD rates will come down.

And so when it comes to investing, we're always looking long term. And so the question for you is, well, let me ask you, what is your age? 72.

Okay, so let's say the Lord, you know, has still has a lot for you to do here. And you live to 102, or even 92. I mean, so then you have two or three more decades for this money to last. So we can look out 20 or 30 years and say, what's the right investment strategy for you for this retirement account? And if you were sitting with an advisor, they would say, you know, tell me what the you think the future holds for you?

Where are you headed next? What kind of income sources do you have? Social Security?

Okay, great. What else do you have? How much income do you need to draw from this retirement account? How much return are we looking for each year? And typically, for somebody who's 72, they might, you know, come up with a portfolio where, you know, maybe 30 to 40% is in stocks, which gives you a growth component. Maybe 60 to 70% is in bonds, and maybe some CDs, and then maybe 5% or so in precious metals or gold.

I mean, that would be a fairly typical portfolio. And the goal would be to generate enough income so that if you wanted to start pulling out, let's say 4% a year, that you could do that and maintain the balance. But with inflation, if you don't have it invested, you're going to lose purchasing power over time because things are getting more expensive.

And that's why we keep a growth component. So the CDs are a good short term solution. But when those CDs are up in seven months or a year, and instead of paying five, they're paying three or two or less than that, that's really not going to offset the effects of inflation. And that's why we put other things in a properly diversified portfolio. Are they more risky than CDs? Sure, because the government's not guaranteeing the return, but they also have the potential for a greater return. And so we balance that risk by having good diversification and a proper what they call investment allocation that's appropriate for your age.

And that's why typically you work your whole life, you amass some wealth, and then you have an investment advisor that is the one making those investment decisions for you. Does that make sense? It does. Thank you.

Okay. Yeah, you're very welcome. There's some advisors there at TIAA-CREF.

You could also connect with a certified kingdom advisor there in Illinois just by going to our website, faithfi.com and click find a professional. Thanks for your call today very much. Let's round out the program today by talking to Tammy in Mississippi. Go right ahead.

Hi, Rob. Thank you for taking my call. I have a question about a whole life policy. I'm calling for a friend of mine, age 68, and he's had this policy, goodness, since the early 90s. And the issue for us is, he doesn't need the money for a death benefit.

He's got that covered. But it says that there is a cash surrender value of 36,000. But our concern is, do you actually get that money? How do you discontinue it? What happens to the money in these policies that he's already put into it?

Yeah, very good. Yes. So the cash surrender value is in fact cash that's available to you. And in most cases, that cash value life insurance is not taxable as it grows within the policy. So it's tax deferred, which means it could be taxable as you take it out.

So you'd want to understand that. But yeah, you should be able to take that out. The implications would be, Tammy, that you're collapsing the policy so that that death benefit would no longer be in force, the policy would be canceled, and they'd send you a check. But you absolutely can do it. And to your point, if the death benefit is no longer needed, I like that idea.

And I think you should be able to take that and put it to better use. Great. Thank you so very much. I appreciate it. You're welcome. And check with your CPA on that.

You may find that, you know, like I said, it isn't usually taxable, but you just want to make sure nothing catches you by surprise there. Thanks for being on the program today. May the Lord bless you. Folks, what a privilege it is to be able to help you navigate your financial lives in light of biblical wisdom. Our goal here is to be hopeful and encouraging, but always to give you wise counsel rooted in biblical truth here on Faith and Finance. Big thanks to my team today.

Certainly couldn't do this without them. Devin Patrick, Pat Montague, also thankful for Jim Henry and the great work he does and everybody here at FaithFi. Have a wonderful weekend and we'll see you on Monday. Bye bye. Faith and Finance is provided by FaithFi and listeners like you.