Graduated Learning: Life after College

I got my degree, I got a job…now what?

Let’s talk about Student Debt: Part 1: Digging In May 24, 2012

Filed under: Personal Finance — Stephanie @ 11:29 pm
Tags: , , , ,

Let’s be honest.  EVERYONE is talking about student debt right now.  With the big article in the Degrees of Debt series in the New York Times, to in-depth discussions on Marketplace Money, to the latest political grandstanding (on both sides) about keeping Federal student loan interest rates low, it’s hard to escape the discussion.

It’s not a new issue.  But every once in a while, everyone starts talking about it again.

So, here’s my story, and my thoughts, on the subject.

When I was getting ready to go to college, I didn’t really know how I was going to pay for it.  I was encouraged by friends and family to go to MIT, even when Rutgers was offering me full tuition (I’d still have to pay room and board and other expenses).  MIT seemed like a better fit for me, and I wanted to go.

My parents had socked some money away in some mutual funds for my 2 sisters and me, but it was not enough to cover all of us.  We filled out the FAFSA forms to see what sort of financial aid we could get.  I was eligible for a small federal loan (not sure if it was subsidized or unsubsidized), and for “work study”, which really meant that I was able to get a job from MIT to earn a little money.  (I worked at the MIT Libraries for a semester or so in the back rooms processing new books).  I had a few scholarships I got through my dad’s work, and a few other tiny merit-based scholarships awarded to students at my high school, but that’s about it.  In retrospect, I really should have tried harder to find more scholarships.  Any amount would have helped.  I also didn’t take all the AP exams for my AP classes, because I misunderstood the way that MIT accepted AP credits.  Oh well.

So, to make up the difference between what aid/need-based discounts I received and the actual cost of going to MIT, I had to take out private loans.  Yep, those loans that they tell you to try your hardest to never have to take out.  There just wasn’t another option.  As a middle-class family, we were doing well enough that we couldn’t get a lot of  need-based financial aid, but we weren’t loaded enough to be able to pay upwards of $160k to send me to college for 4 years.

So, each year, I took on private student loans.  My parents did co-sign the loans.  But it built up during the 4 years at college.  And so when I graduated, I had $57,701.00 in private loans, and $18,218.61 in federal loans.

Honestly, like many of the people talking about student loans, I didn’t really know what I was doing.  I took on the debt a bit blindly, and there were ways I could have taken on less debt.

How could I have taken on less debt?

  • I could have gone to Rutgers instead of MIT.  I don’t think Rutgers was the right fit for me, but had I gone there, I’d have had tuition covered due to in-state tuition+ my GPA/SAT scores.  Final verdict:  Going to a public school would have been cheaper, but if I had to do it all again, I would still go to MIT
  • I could have looked for more scholarships.  I have a feeling there was plenty of money out there that I could have tried to get, but didn’t really look.  Plus, I didn’t really think to look for more scholarships after freshman year.  Final verdict:  Glad I got a few small awards, but I should have tried harder to find funding for freshman year and beyond.
  • I could have tried to earn more AP/college credits before attending college.  Though MIT wasn’t very big on accepting outside credits, had I gone to another school, getting college credits through AP or a cheaper school would have helped lower costs.

There are lots of things I could have done going in.  But I’d like to think that some of my decisions helped me slowly dig my way out of debt.  I’ll talk more in another post.

What were your best and worst decisions when it came to paying for college?  What did you wish you had known?  What are you glad you did?  What advice would you give to high schoolers planning for college?

Advertisements
 

Goodbye, Sallie Mae! May 5, 2012

Well, I just clicked a button on the Sallie Mae accounts page that should have my federal student loans PAID OFF IN FULL!

It feels really awesome.

The loan started out as a bunch of federal student loans that I consolidated back in 2006 (after I graduated).  So they were serviced by the same bank that my private student loans were at.  At some point last year, Sallie Mae stepped in and took over as the company in charge of my loans. The Sallie Mae accounts page made me want to pay off my debt even faster, since they showed the daily accrued interest.  I was getting sick of it!

So today, I paid them off.  I’m no longer paying 3.5% interest on any debt.  Woo!

Of course, I still have about $29k in private student loans (thanks for being so expensive, MIT!), but they’re at a pretty sweet rate of 2.75%.  But I’m still coming after those!  And that’s much better than what I graduated with:  more like $70k at 8.5%.  But I’ve been aggressively paying that down, too!  Luckily, that loan’s rate was pegged to the Fed Rate, and (unluckily for those of us with savings accounts) the Fed rate has dropped like crazy since I graduated.  Plus I enrolled in all the programs that the bank had to offer that would lower my rate.

I am thankful that my rates are so low.  I know a lot of people aren’t as lucky.

But the final message for today:

My federal student loans are GONE!

 

[Edit 5/7/12:  Just looked back on my private student loans.  Turns out I only started with $57k at graduation.  And so far I’ve paid $49k in principal and interest, but I still owe ~$29k.  It’s mildly frustrating realizing I’ve already paid at least $13k in interest on my private loans (according to the loan company).  No, not mildly frustrating.  Gut-wrenchingly disgusting.  Oh well.  NEVER AGAIN!  (until I buy a house)]

 

Student Loan Payoff Progress December 17, 2011

Filed under: Personal Finance — Stephanie @ 7:47 pm
Tags: , , ,

If you follow me on twitter, you know I’ve been thinking a lot about paying off my student loans.  I already have my loans set to auto-pay every month, and, while that was slowly whittling away at the total amount, I felt like it was going to take FOREVER to pay it all off.  One of my loans had recently been sold off to Sallie Mae, and when I logged into their site, it showed the daily accrued interest.  Seeing that every day I left these debts unpaid meant more I had to pay in the long run made this really hit home.  I knew in my head that I was paying interest, but seeing it accrue gave me the kick in the pants I needed. At one point I was going to pay all of one loan off, then I went to half of that one loan, then I was afraid to do anything.

My final decision:  Pay $4,000 towards a loan currently at 3.5% interest.

I still have $4,584.34 to pay off on that 3.5% interest loan, and $30,330.61 total on a group of loans at 2.75%.

I headed over to the What’s The Cost’s snowball calculator to see how long it would take me to pay off these loans.  If I keep paying the minimum that is auto-paid every month, I’ll finally be free of these student loans by March 2018 (assuming that when I finish paying off the 3.5% loan, I’d use that money to pay down the remainder of the 2.75% loans). That is WAY too long.  I don’t want to wait that long.  That’s a lot of extra interest accruing.  And with interest rates on savings accounts now below 1% for pretty much every account I know of, it would make more sense to pay down the loans more quickly. So, I went back in to the snowball calculator, and tried to figure out how much I’d have to pay if I wanted to be rid of the debt by the end of 2012 (a wild goal I considered making after I felt so good paying the $4k).  Turns out I’d have to pay around $3k PER MONTH to get rid of all my debt within the year.

Here’s the thing:  I have a lot of money in savings.  Possibly too much, considering other things I could have done, like pay down my loans more quickly, or put more in my 401(k).  I’m basically like the people on Hoarders, but with money.  I’ve got a solid emergency fund, plus I’m saving up for a down payment and maybe eventually a wedding.  But those are still a long way ahead of me.

So the question is:  should I use my savings to pay off my loans?  In the long run, networth-wise, I should just get rid of my debt.  Granted, I was more keen on getting rid of it back when I graduated, with it being at 8.5% on $70k or so.  Most people would be willing to do almost anything for a 3.5% interest rate on a loan.  Part of me really just wants to get rid of that debt.  And if I draw from my savings, I think I can do it. But I should keep an emergency fund.  You know, for emergencies.

I think my best bet is to just set an amount that I will pay every month beyond the minimum.  I’m thinking $500-$1000 extra per month.  I think it can be done.

For now, I’m really glad that I made a big dent in my loans.  And that meant I met my first goal that I set on Payoff.com (and earned the First Goal Complete badge!).  And I earned 4000 credits on SaveUp.  So, besides lowering my debts, I got a few virtual rewards 🙂

So, would you pull money out of savings to pay low-interest debts?  Is there an amount or an interest rate that would make you change your mind?

 

What a difference a year makes January 1, 2011

Filed under: Personal Finance — Stephanie @ 7:44 pm
Tags: , , , , ,

Happy New Year!  It’s hard to believe it’s 2011.  One of my resolutions is to get more involved in blogging:  blog more, get more involved in the personal finance blogging community, and maybe even transition to my own domain.  So I guess I should start this year on the right foot with a new post!
After reading this post at Paying Myself, I felt compelled to review my financial standing.  But, because I’m not completely anonymous (my “real life” friends read this blog), I decided to just post the change in each account, as opposed to what my actual assets and debts are.  I know that money is still an uncomfortable topic in social settings, so that’s my reasoning behind hiding some of the information.

So, let’s review:

Assets:

  • Liquid assets (checking and savings accounts):
    +$4319 (would have been higher but used a large amount…see Car Loan below)
  • Car (edmunds.com private sale value):
    -$1,090 (I know there’s a lot of debate over including cars in net worth calculations.  I initially included it to make myself feel better about my auto loan, to balance out the ugly dip in my net worth)

Debts:

  • Student Loans:
    Reduced  payoff balance by $7,127

Change in net worth since last year:  +$43,140

WOW.  I don’t think I ever stopped to realize how well things went this year.  Shoot.  I feel like I’m bragging now.

But looking at this, plus reviewing a lot of the comments on some of my older blog posts (like on I’m okay with being wrong sometimes, Personal Finance Stagnation, and Fighting Lifestyle Inflation), I realized I should be more aggressive with my student loan payoff.  Granted, the interest I’m paying on my student loans isn’t that much higher than the interest I’m earning off my savings accounts, but I think I have enough saved for emergencies, which is always goal 1 when you’re reviewing your finances.  My next main goal after paying off my debts is buying a house, so I do want to have money for a down payment.  But as Big City Beer Budget pointed out here, banks will be looking at your total financial picture when considering you for a mortgage, so the less debt I have, the better I’ll look, and the lower interest I might have to pay.

As you probably could tell from a lot of my posts, I’m always second-guessing myself when it comes to my personal finance priorities.  Reviewing my accounts, I also realized that while I save money at a consistent and steady pace (everything automated at reasonable amounts), I tend to pay debts in a more erratic rate.  With all of my student loans (and before, with my car loan), I paid the monthly bill, i.e. the minimum.  But every once in a while, I realize I should be paying off my loans faster, since paying only the minimum is never the path to getting out of debt.  So I pay a few thousand dollars towards my student loans (or in the case of my car loan, completely pay it off).  But then more months pass, and I’m back to just paying what the banks tell me to, since that’s the way the autopay is set up.

I have to make a plan to get rid of this debt.  I think maybe I should figure out if I can set up an extra or higher autopay for my student loans.  Plus I could also do another lump sum payment with that extra $4k that I built up in my cash accounts.  We’ll see.  I think I’ll try to keep my blog posts shorter in the future (another resolution?) but I tend to have so much to say once I start thinking about something!  Maybe I can start turning these into multiple posts 😛

Happy New Year!!

 

Next step on the personal finance path October 27, 2010

Filed under: Personal Finance,Uncategorized — Stephanie @ 11:31 pm
Tags: ,

So, now that I’ve paid off my car loan, it’s time to re-examine my personal finance goals.

First, a fun fact:  When you pay off your car loan they send you the title to your car.  So I got my title in the mail last Thursday!  Even funner fact:  my roommate got her title in the mail the same day!  What are the odds?

My next debt to tackle:  Student loans.

Changes I plan on making to my finances:

Every month, I had paid my car loan with an automatic transfer from my ING checking account.  I’d also transfer a slightly higher amount into that ING checking account every month.  So I’d be slowly stashing a little bit of extra money into savings.  Now that my loan is paid off, I’m going to set the monthly transfer to go to my Down Payment Fund instead.  This means I earn a little bit extra interest-wise.  Plus I’m still keeping the money out of my main spending account.

As is customary in personal finance, I’m now going to pay the amount I paid on my loan each month towards my student loans.

Overall, this means that a different account gets my monthly savings transfer, and a different account gets my monthly loan payment.

Technically, all the money will be leaving my main checking account now (just the way things are in my current system).  But this means I’m still putting money towards a down payment, while paying extra towards my student loans.

Is this the wrong approach?  Should I be working harder to just eliminate my student debt instead of saving for a house?

 

I paid off my car loan! October 19, 2010

Filed under: Personal Finance — Stephanie @ 6:09 pm
Tags: , , , ,

You may recall that, a little over 2 years ago, I bought a car.  I had gotten a new job that I was going to need to drive to (no direct public transportation route).  So, between asking around, reading my consumer reports, and doing a few test drives, I decided on my car.

But how was I going to pay for said car?  I didn’t really have enough in savings.  Well, maybe I did, but then my savings would be completely depleted, and I wasn’t too keen on that.  So I tried to figure out where my loan could come from.  This was back in 2008, when people were still buying cars.  In fact, I’m pretty sure it was at the boom where everyone was looking for a fuel-efficient car, due to the ridiculously high gas prices.  So, unless I was going to buy a Hummer or some other gas guzzler, I wasn’t going to get a cushy 0% financing through the dealer.  In fact, when I asked them about their financing, they actually couldn’t compete with the rate that I was pre-approved for.  I had gotten my loan from a local credit union through AAA.  It wasn’t the best deal, but 4.49% was as good as I was going to get.  Yes, I could have bought a used car.  Yes, I could have looked harder for a better loan, tried harder for a better deal, or used up my savings instead.  But I didn’t.  I wanted a new car because I knew it would get good gas mileage, be safer, and I was going to drive it for as long as possible.  And yes, car loans are cheaper now, and I have enough money now, but I was in a bind at the time.

I hated having a car loan.  I wanted to get rid of it.  It was my highest interest rate loan (since my student loan rates kept dropping), and I wanted it gone.  But I was a bit uncomfortable getting rid of all that debt without having a good amount of money in savings.  So I made a deal with myself:  I’d save up for two years of expenses, then I’d pay off my car loan.  Mathematically, that doesn’t make the most sense:  the interest I earn on savings isn’t as high as what I’m paying on my loan.  Psychologically, though, it makes perfect sense for me.  Still, I set a goal in my mint account to get my savings to the magical 2 years expenses goal, and waited.

So, October 2nd, I transferred money from my ING savings to my ING checking, and then had ING checking mail out a check.  The check went out October 4th.  A few days later, I logged into the credit union account, and my loan account was GONE!  And that’s it.  I PAID OFF MY CAR LOAN!

Doing all the calculations, it turns out paying 3 years early saved me only $753.52 in interest.  I was informed when I signed the loan that financing for 5 years would cost me $2109.70 in interest.  This also means I ended up “wasting” $1356.18 in interest.  I feel a little silly about that.  But what’s done is done.  Lesson learned.  Moral of the story:  Don’t take out a loan if you don’t have to.  And my hope and plan is to never take out a loan for a car ever again.

Still, paying off my loan feels absolutely awesome.  I’m really excited about my personal finance plans.  Watch out, student loans, you’re next!

 

I’m okay with being wrong sometimes March 21, 2010

Filed under: Personal Finance — Stephanie @ 1:55 am
Tags: , , ,

This post was inspired by one of Debt Ninja‘s recent posts (on his awesomely named blog, Punch Debt in the Face).  He wrote about how he’d rather have some debt and more in savings than no debt and less savings.  Basically, he wasn’t comfortable using his savings to pay off his debts and join the magical realm of the debt-free.  Later, when Consumerist ran his post, there was quite a few nasty remarks about what he SHOULD be doing.

I’ve been struggling with this situation for a while:  accelerate my debt payments, using money in savings, thereby increasing my overall net worth (because my debts are at higher interest rates than what I am getting from savings accounts), or just keep building up savings while slowly paying off debts.  Mathematically speaking, I should be paying off my debts.  But in this economy, I’d rather have more savings, with manageable debt payments, than less savings and hoping nothing bad happens.  I’m a worrier.  That’s the problem.

Also, my debt interest rates are pretty darn low.  My student loans are at 3.25-3.5% APR, and my car loan is at 4.49%.  If I ended up paying all that off, but then fell on hard times, I really doubt I could get a personal loan or credit card with rates that low.  I also hate the idea of carrying a balance, or adding new loans (with the exception of a mortgage).  Paying off everything (or most of my debt, since my debt load is more than my liquid assets) would mean that I’d probably pay more in the long run.  It’s that “penny wise, pound foolish” idea.  Yes, I’d be cutting expenses even more (though as it is, I’m NOT a spender), but I’d rather have money in the bank than be completely debt free.

Don’t worry, as of now, I’m working towards eliminating my debt.  It’s a long and painful process.  But I also worry that I may be doing other things wrong.  Balancing all these financial priorities can get me a bit stressed.  Besides looking at the short-term (the savings vs. student/car loans), I know that I’ve got to save for retirement.  I max out my Roth IRA each year, and I contribute to my company’s 401(k) up to the 4% match, but I know I could be diverting more money to my retirement funds.  I could be contributing up to the max, $16,500.  But that’s a lot.  I wouldn’t have to max it out, but just start contributing more.  I checked this 401(k) Savings Calculator, and, even assuming no increase in salary, my retirement account total (at retirement age of 65) increases by more than $100k for every additional percentage point.  I’m still early in the game, so compounding is really in my favor on this one.

So am I changing my 401(k) elections?  Not yet.  Why?  I’m going to wait until my emergency fund hits its magical 2-years of expenses point.  Yes, that’s excessive.  But once it’s there, I promise to up my 401(k) contribution to 5%.  I’ve decided that.  You can hold me to it.  And perhaps we can set another milestone for when I increase my 401(k) contributions to 6, 7, 8% etc. (I welcome your ideas!)  And in the meantime, I’ll be paying off my debts.  And saving towards other goals.  And you can tell me that I should be paying off debts instead of having a 2-year emergency fund.  If you can provide a valid enough argument, you may convince me to change my ways.  But until then, I’m going to continue doing the “wrong” thing.