Teaching you to embrace today while making yourself a millionaire!

I wish I would have understood how easy it is to become a millionaire by starting to save small amounts of money when I was younger...

I feel compelled to share the simple concepts you can apply today....


27 October 2008

Repayment of Student Loans big concern

I want to thank the Sigma Phi Epsilon fraternity at Ohio State University once again for a great night discussing your current and future concerns.

I just compiled all the surveys and it seems the most prevalent current financial concern is repayment of student loans. I have a few thoughts on this topic - some from my own experience, my experience with my children and lastly from all my years of working with people who are trying to make ends meet while paying back loans and saving for retirement.

National average for undergraduate loans is about $20,000. I have attached a repayment calculator that you can run some numbers for varying repayment options. As always, the sooner you can pay off the loans the better. You really don't want to finish paying off your student loans as your kids are entering college.

During the presentation I discussed some recent college graduates that I have been working with to help set themselves up for financial success. There are 4 people that are making between $32,000 to $55,000 a year. They opted to rent a 4 bedroom house in a nice suburb that was affordable. They were able to upgrade their college lifestyle to a nice house in a safe neighborhood. They furnished most of the house with donations from family members. They coordinated with each other so not to spend a bunch of money needlessly. They split utilities and share the 2 car garage. It took flexibility but they believe the long term pay off is worth going this route.

By choosing to take this step they are able to save 15% of their salary in their 401K's and make additional principle payments on their student loans. They are hoping to have the loans paid off in 5 to 7 years. One of the graduates had no student loans however needed a car - this afforded her the opportunity to get a new Honda Accord. They are also saving an emergency fund. It is always good to have 3 -6 months of living expenses readily available. They are able to still eat out and travel while moving forward in their lives.

The other options were to not save and spend more on living expenses or move home and save. This has been a great comprise. Affordable independence while being a responsible adult. I went by their home the other day and it is decked out for Halloween, they hired a neighborhood kid to cut their grass (trying to teach him financial independence) and they were enjoying sitting on the front porch and relaxing.

I am also working with students who are trying to keep the loan amount to a minimum. A few suggestions: figure out your expenses for tuition, housing, food and books. Do not borrow more than you need. If you can work in the summer to cover some of the costs - DO IT!, if you can work part time during the school year to cover the costs of extras - DO IT!, using loan money to eat out or party with your friends is insane. $7.oo lunch over the time of your loan is about $15.00.

If you do this on a regular basis you are spending thousands of dollars that is going to take you years to pay back.

The trick is to really place a value on what you are going to spend your money on. Is it going to get you closer to your goals. Is it a short term pleasure that will have no lasting effect on your life. The football games, fraternity or sorority dances, home coming are part of the college experience you may not want to miss so plan for them.

Some programs have co-op opportunities where you can work every other term. That is a wonderful way to gain experience while making decent wages to pay for school. Scholarships are out there. Normally, not easy to figure out but if you are willing to put the time into researching and applying for them -it can help reduce your costs.

I would love to hear some of your tips on cost saving and ways to earn money for school to keep your loans to a minimum.

It comes back to choice and values. I am not a big advocate of loans and debt but if you are getting loans for school to invest in yourself, as long as you put forth 100% effort and get that degree - you will never borrow money for a better reason.

Stay tuned......


Stefan said...

Something that really helps is having a job during school. I went through my college/department (College of Social and Behavioral Sciences Sociology Department) and found out what internship opportunities were available. Not only were there dozens of options, but there were even PAID internships avaialable. I applied for many paid opportunities and ended up getting a spot working with the Bureau of Workers Compensation Fraud Department. I had this internship for over 18 months, and upon graduation I had less debt and more field experience. I easily saved $8,000 in loans by working during my non-class hours or days and paying for rent and other expenses. I wish more students looked into these opportunities, because they are out there, and many of them go unfilled due to lack of applicants. That's great money and experience for just a little searching.

M said...

I have to agree with your post and Stefan's comment on working during college. It really does make a difference. I worked at school as well as during each summer break and used that money for books, weekend activities, etc.

Most schools have a student job fair at the beginning of the year - I would suggest starting here. I got my first job working in the campus computer labs.

Aside from the extra money, I found I had a real knack for working with computers. I actually adjusted my studies to experience with technology and ended up taking an IT job when I graduated college.

j said...

That is a great suggestion-- to work during school. Although I was fortunate enough not to have any student loans, I could have EASILY worked during school to start creating an emergency fund. That would have come in VERY handy. I think that having an emergency fund would have allowed me to save $$ and stay away from the trap that is credit card debt!
I wish I would have a resource like this one when I was first starting out...

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