The $25,000 Choice
May 22nd, 2008 by Kate Olson
(Cross-posted at Kate Says)
Yes, I KNOW this is a controversial subject and I’m writing it anyway! I also have NO qualms about talking about my personal finances, which I know isn’t all that normal………..
Here are the facts:
- I’m 27 years old
- I have $25,000 in student loan debt
- I have a B.S. in Business
- I’m halfway to a Master’s in Education
- I started my MBA
- My monthly student loan payment is $144.37
- I deferred my loan for 2 years while I stayed at home with my kids
After asking around this morning on twitter, I realized that $25,000 really isn’t over-the-top, but it’s still a LOT of money. How’d I get here? Well, my mom made it clear from my sophomore year in high school that my brother and sister and I would be responsible for paying for our own college educations. Before you start condemning my mother and her evil tactics, let me just say that I THANK HER for that. Why? Well, I chose a state school that was more affordable (but a GREAT in-state business program), I entered college with 7 credits (from AP courses I took in HS), I gained an incredible experience in Army ROTC which would have paid for my education (unfortunately I had to quit after my sophomore year due to physical issues), I worked my tail off all during college at various jobs (that have helped me immensely in my professional life) and arranged my course schedule to enable me to graduate with my B.S. in 3.5 years. I guarantee I wouldn’t have done some of those things (any of them?) if I had someone else paying for my college education.
After my undergrad, I actually went BACK to school - first to start my MBA and then to do a post-baccalaureate program to get my teaching license - these add up to about $10,000 of my total student loans. Were these expenditures worth it? A resounding YES. I’m aching to finish my MBA right now, but I do know when enough is enough for the moment - I can’t see the return being high enough at this time to be worth the additional loans needed…….and our family’s income is too high to qualify for low-interest loans.
As for managing the debt now, I approach it differently than our other debt (cars, house, credit cards). I had no issues deferring the loans to stay at home with my kids because I knew that the education was valuable whether I was “applying it” or not. I see student loans as just a given in my life and the most worthwhile investment I could ever make. The interest rate is lower than on any of the other debt we have and also lower than the interest rate on our ING Savings account - I see no point in paying more than the minimum on this debt and consider the interest accrued during the time I stayed at home to be a more-than-worthwhile investment in our family.
As for starting college savings accounts for my kids (whom I love more than anything else on earth and of course want only the best for), I prescribe to my idol Suze Orman’s theory - don’t put money aside for your children’s education before having high interest debt paid off and have money put aside for your own retirement.
So, thanks to my mother for being strong enough to tell me I was on my own and I hope my children appreciate me doing the same for them……………..
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Not to take anything away from your Mom, but it appears as though the number one person deserving of thanks is yourself!
Good luck with your fortunes. I hope you find yourself able to pay off your debt sooner rather than later.
Peters last blog post..PZ Myers doesn’t get it
APPLAUSE! Saw your tweet earlier. It’s wonderful that you accomplished all this. No, I don’t think $25K in student loan debt is over the top and yes, it is a lot of money but less than a new car (which will wear out!). Our lives our similar - my parents offered me what they could afford (thank you mom and dad) but I wanted to go to a private college and because of the limited piggy bank I forced myself to take more credits and graduate from a four-year program in three years (yes, kids, it is do-able - you just have to sacrifice some of your fun college nights to study, set very ambitious goals and be incredibly focused…). Some of my classmates were given their education (and spending money) on a silver platter and didn’t value what they had - I did and you did too. I think kids should have to work hard and learn life lessons, and yes, as a parent if I can make things a bit easier (when appropriate) I will do my best, but in the end the lessons learned are more valuable than any amount of cash I put into a 529 plan 18 years before my son will use it. As an “adult” I went back for my MBA pre-children but 7 years into my career (although it was subsidized by my workplace - I paid for the balance). Even so, the difference in perspective and appreciation for the work and value my second degree is amazing in retrospect. I still had a bit of “entitlement” connected to my undergrad degree, whereas with my MBA it was truly earned. Good luck with the degree – it sounds like you are almost there!!!
Sarah the Spunky Mommy @myjezis last blog post..Baby on Board (of the BOAT)
Just a note, Kate — Not only do YOU approach this debt differently, but so do the credit bureaus, banks, etc. Student loans don’t count on your credit report, don’t weigh on your ability to borrow for a house or a car, etc. (At least as I understand it.) Plus you have essentially forever to pay them off. You’ll get there.
Peter - Thanks for the encouragement! My goal is to have my student loans paid off before I retire, that’s all I can hope for right now
Sarah - I emailed you about this, but thank you SO much for sharing your experiences! Everyone always seems so amazed to hear I managed to graduate early, but thousands of dollars can do a lot to motivate a 21-year-old
So neat to hear that you were able to do the same, and even faster than I did!
Tim - Thanks for the reinforcement that I’m doing the right thing
My main debt concern at this point is credit cards, so we’re pounding away at those.
You are applying your education in establishing an educated family, one where the value of hard work and study is appreciated and put into practice. Your college experience–including your financial management of it–is part of what makes those values a real and present part of your children’s family culture. And that’s a form of “literacy” that is well worth the price!