The Things I Wish I'd Learned BEFORE College

Seeing the balance on my student loans always makes me cringe. I have been in and out of college for 13 years and have yet to complete a degree. I just can't seem to decide what I want to be when I grow up. Making that decision even more difficult is the fact that I have a job that I love that pays well in a business where I have worked my way up from the bottom. With the job market as it is, though, I realize that my job may not always be here and, should it disappear tomorrow, I would be hard-pressed to find another position earning what I do based solely on my work experience. A majority of those in my department have degrees in something ranging from biology to theater, but they have degrees and that counts for something regardless of the fact that the required classes to earn these degrees do not apply to this position. As much as it irritates those of us who have not earned degrees, this is the world that we live in so we need to keep up or assume the risks.

I am crossing my fingers that work will slow down just enough that I can start taking classes again at the beginning of the coming year. I won't be taking out a single loan to make this happen, however. I will never sign another student loan document with the exception of a check to pay off each one. I currently pay them via online bill pay, but I want the satisfaction of hand-writing those final payments. Below are some of the things that I wish I had thought about prior to signing up for student loan debt starting at the tender age of barely-18.


1. Student loans must be repaid and will affect your lifestyle for years or even decades after you graduate (or drop out).

Student loan payments can drastically affect your lifestyle. It's frustrating making hundreds of dollars worth of payments every month when all you have to show for it is a prestigious piece of paper, much less if you never earned said piece of paper. There are very few ways to get out of repaying your student loans. They're not bankruptable. You can't return or eBay your education to recoup some of your money. You are stuck with the debt that you signed up for, so...


2. Read the fine print. Just because it's a student loan doesn't mean it's a low interest rate.

Until I had to start making payments on my student loans, I had no idea that I had signed up to make payments at 18% interest for 15 years. 15 years!!! Had a loan officer said to me at 18-years-old, "You will begin making payments on this loan at age 22 and your loan will be paid off right around the time you turn 37." there is no way I would've signed that piece of paper without at least thinking about it for a while.


3. You don't have to spend every last penny that is handed to you.

Spending student loan overages on things other than school necessities only extends and increases the payments you'll have to make in the end. I'm making payments on pizza, shoes, and a $500 car that I drove for less than a year more than ten years after all of these things are long gone. Just because the money is handed to you doesn't mean you can't spend what you need and give the rest back. Carefully consider what is truly a need and what is a want.


4. If you don't have a major, don't attend a private college.

Yes, there is some prestige that comes with the names of some universities, but not if you can't afford to stay long enough to graduate. I spent $27,000 to for three semesters of general courses that I would've had to take at any school. Here is a tip: To say that you graduated from Harvard (for example), you only have to complete your degree at Harvard. You could spend three and a half years as a full-time student at UMass for about $41,000. One semester at Harvard costs over $19,000. So, to graduate from Harvard, you can spend four years there and spend well over $150k, or you can spend $60,000 (or even less if you attend a school other than UMass - I just choose a state school in Massachusetts for this comparison). Both students get a degree declaring their graduation from Harvard.


5. Student loans aren't a necessity.

Future students and parents: Plan ahead for college. This is a foreseeable major expense. You can save for it. You can work hard in school. You can apply for a million grants and scholarships. You can shop around and find a great school that is within your budget.


6. Financial aid can be negotiated.

Government grants may not be negotiable, but assistance from your school may be. Talk to a financial aid counselor and find out what kind of assistance is available. You may qualify for grants and scholarships for students in need or reduced tuition. When it comes to money, treat the school as a business and think of yourself, the student, as a customer. You have the option to obtain your education and spend your money (including grants and scholarships) elsewhere. It may be in their best interest to work with you.


7. Where there is a will, there is a way.

American culture pushes doing everything the easy way. Technology has advanced in ways that allow us to do more work with less effort. Much of the media promotes instant gratification and constant entertainment. I know parents have been using the phrase, "When I was a kid..." for generations and no teenager really wants to hear it, but there are some real lessons that can be learned not only from prior generations, but from those in the younger generations who have embraced hard work. If there is a gap between what your grants and scholarships cover and what college is going to cost, find ways to reduce that cost or pay for the difference. Consider living at home rather than on-campus or reducing your course load. Work during college. Sacrifices may need to be made. These may be your first real grown-up decisions if you've just graduated high school and they won't be easy, but they are important.


Please leave a comment with your own lessons learned regarding student loan debt.

If we someday adopt the metric system, will I have to call these kilometerstones?

As of this morning, I've made two big accomplishments.

1. I paid off another credit card!  This is the last card from my college credit card debt and I am so happy to finally be rid of it.
2. With the payments made today, I've crossed the next big marker on my debt-o-meter.  I have now crossed the $4k threshold for debt paid off.  That means I've paid off more than 11% of my debt in under three months!

So, here's the update in numbers:

Direct Deposit Advance - $0/$550
Store Card 1 - $0/$323
Credit Card 1 - $0/$400
Line of Credit - $0/$510
Credit Card 2 - $0/$685 - PAID!!
Student Loan 1 - $1950/$1951
Store Card 2 - $2,638/$2,800
Student Loan 2 - $2,765/$3,148
Auto Loan - $3,735/$4,140
Credit Card 3 - $4,376/$4,577
Credit Card 4 - $4,910/$5,150
Student Loan 3 - $5,610/$5,614
Student Loan 4 - $5,904/$6,048

Total paid to date:  $4,131.05

(plus I have my $1,000 Emergency Fund in the bank, which didn't exist before this process started)

All of those little balances are out of the way.  The remaining larger balances look a little daunting, but I'm determined to keep the momentum going.  I'm going to skip over Student Loan 1 for now and knock out Store Card 2.  Student Loan 1 has a whopping $6 monthly payment which must be spread over about 72 years or so, but it has an incredibly low 3.25% interest rate.  Store Card 2, meanwhile, sports a 25.24% interest rate and a $80 minimum payment, $56+ of which goes to interest every month.  I'm looking forward to the day that I never again have to look at a statement with a double-digit APR.  In fact, when I'm through paying off this debt, the only interest rate I ever intend to see again might be for a mortgage.  Maybe, but we'll see.  Maybe I'll just save up for a house and pay cash.  Or maybe I'll build one a little at a time as I can afford whatever Lincoln Logs are needed to build a real-people house.

If I can keep going at this rate, I can be debt free in less than two years.  That would be amazing.  Most or all of this debt is going to be gone before the girls start kindergarten.  That means that I'll be in savings mode throughout most of their school years.  I can't believe that as a single mother raising twins I'm going to be able to pay for both of them to go to college by myself!  Paid-for college is going to be a reality!

the baby steps

I've mentioned that I'm following the incredibly simple debt-reduction plan taught by Dave Ramsey.  To give you an idea of what exactly that plan is, here is a list of the seven "baby steps" he teaches as a means to get out of debt and build wealth.


Baby Step 1
$1,000 to start an Emergency Fund
Dave frequently refers to this Emergency Fund to as "Murphy Repellent," meaning that Murphy's Law ("Anything that can go wrong will go wrong.") seems to apply far less to those who are prepared to deal with the unexpected.  It is crucial to keep perspective on what is truly an emergency when considering using this money.  Is it really an emergency?  Could I save money to cover this expense rather than pulling money from my Emergency Fund?


Baby Step 2

Pay off all debt using the Debt Snowball

The Debt Snowball pays off all debts except a first mortgage.  Dave suggests paying off the lowest balances first.  Pay the minimum on everything except the lowest balance and put everything you can toward that creditor until it is paid off.  Then take the amount you were putting toward that balance and attack the next lowerst balance.  As each balance is paid off, the snowball grows and more money is available to pay toward the lowest balance each month.  Learning to live on a budget and within your means (living on less than you make) is the only way to get out of debt and stay out.

Baby Step 3

3 to 6 months of expenses in savings

After the debt is taken care of, it's time to beef up the Emergency Fund.  More savings means you're better prepared for bigger emergencies should the arise.

The next several steps overlap or occur simultaneously. With the first three steps, you are digging out of a hole and ensuring that you are prepared to handle emergencies without incurring debt. The remaining steps are about building wealth.


Baby Step 4

Invest 15% of household income into Roth IRAs and pre-tax retirement

This is just the start of retirement preparation unless you're already on the verge of retirement.  Once the rest of the Baby Steps are complete, more may be invested.  My company matches 401(k) contributions, doubling the first 1% and matching the next 3%.  That means that if I put in 4% they will put in 5%.  That's free money!

Baby Step 5

College funding for children

R and K will be starting college at the same time, so this step is a little intimidating.  R declared the other day that she wants to be a doctor.  Later the same day, we were driving past the private college that I attended briefly and she told me that was where she wanted to go to school.  Granted, she is not even four years old yet, but I want to support her big dreams.  After all, I want to be in a nice nursing home someday!

Baby Step 6

Pay off home early

Home mortgages are the only type of debt that Dave Ramsey understands as a necessity for most people.  He would prefer that everyone pay cash but that's not an option for most people.  He provides some guidelines for those looking to buy a home:

1. Utilize only 15-year, fixed-rate mortgages.
2. Your monthly payment should be no more than 25% of your take-home pay.

Using these guidelines helps you to keep the cost of your home within your means and if your payments are reducing your mortgage balance at a faster rate, equity in your home is built more quickly.

Baby Step 7
Build wealth and give!

With the first six steps out of the way, you can invest more in your retirement if you'd like.  You can give more to the philanthropic organizations that are important to you.  You can even add more cash to the fun envelopes!  A fortune cookie I got recently said it best: 

"If you continually give you will continually have."

So those are the Baby Steps!  That's not so hard, is it? :)

This blog is now open to the public.  Feel free to pass it along to anyone you think may enjoy or benefit from it.  The links over there ---> might help me pay my debt down faster if I find myself with some followers who click on them now and again.

I'm adding labels to my posts so specific topics can easily be found.  I've also added a net worth tracker.  It's not much to look at right now, but it'll be fun to watch it change.  I'm a nerd for math, graphs, and spreadsheets so all of this is kind of fun for me.  I like paying bills.  How weird is that?

Please leave your answer in the comments below. :)