When writing my thoughts on the College Debt Issue, I had SO much fun…I mean, INFORMATION, that I decided to divide it into two parts. This part (Part I) talks about why I decided to go to college debt-free. And for your enjoyment, I have created Part II, which covers all the stuff I did to pay for tuition. Then I thought…gee, after you read all of this you’re going to want to know how we paid for school and paid off my husbands’ $23,000 debt at the same time. Well, you’ll just have to stay tuned…
I had been introduced to the well known radio host and author of Total Money Makeover, Dave Ramsey, in high school. It was his book, and the influence of a mentor, Lynn Pratt, author of Debt-Free College: We Did It!, that I made the decision to pay for college instead of taking out loans. Deciding to do something like getting through college debt-free is not a simple decision, it cannot be taken lightly, and there is no magic set of steps to follow to get there. In fact a lot of it involves taking risks, going against the flow, and trusting that somehow, someway, you WILL graduate!
During my seven year “career” in college, I learned some very important principles that I carried with me and reminded myself of when I felt discouraged. I would like to share the most important ones with you.
The First Principle: Having faith that God will provide is not old-fashioned.
When I made this decision, I was a naïve high school kid. I had no concept of just how much $20,000 a year in tuition really was. But it was this kind of “blind” faith that got me through debt-free. I believed that my freshman year of college would be paid for, no problem. I prayed for God to bless the choice that I made to be wise with my finances and to be debt-free through school, and I knew that He would (I want to be clear here that I did not believe that I could sit back and wait for the money to appear, but that I saw opportunities to work and earn money as God providing for my schooling). The amazing thing is…the entire bill was paid. The summer before I started my first semester, my mom and I worked hard to find as many scholarships as possible. With a balance of a few thousand dollars, and being set up on a payment plan, I started school that fall. Over the course of the school year I received money from my parents, from my on-campus job, from selling a car that my uncle had given me, and from an essay contest I won the week my final bill was due. I even received a check for $1,000 from a church member that I barely knew, along with a letter saying she had been saving it for a long time, and felt that I was the person it was to go to. Even up to the last minute, God was faithful in providing opportunities for my tuition to be paid. Faith really can move mountains my friends.
The Second Principle: Just because something is good, doesn’t mean it will be easy.
Many people consider not using loans impossible and unavoidable, so to them, pulling it off must mean you have access to loads of cash. They’ll say, “Wow, you’re sooo lucky to not have debt! I wish I could do that!” The truth is: it was a lot of hard work, luck was never involved, and everyone CAN do it. You just have to let the ease and comfort of loans become less important than only using money you actually own – which is not as easy as it sounds. Even though it was hard, I would not trade the seven years it took to graduate for anything. There has never been a day that I regretted making the decision to “pay-as-I-go.” There were days that I cried my eyes out driving back to Ohio to work for a semester. There were days when I just wanted to give up because the money didn’t seem to come in fast enough. And yes, there were days when being the only 25 year old in a class of 18 year old “kids” was a little…weird. But I never regretted it. I knew in the back of my mind that I could not feel okay about taking a loan without the money in my account to repay it. Being able to write personal checks for thousands of dollars at a time was an amazing feeling of freedom, and I wanted that feeling to be permanent.
The Third Principle: You may be the only person rooting for you, but that doesn’t mean you’re wrong.
Find supporters to encourage you. My parents, and Lynn Pratt, along with her ENTIRE family (whom her book is about), kept in touch with me and sent me tidbits of encouragement along the way. These always came at the times I needed them most, because not everyone was rooting for me. By making this decision I was going against the norm. I was deciding to do something that NO ONE did. In most opinions, it was not how things are “supposed to work.” I was told that if I left for a semester I wouldn’t come back, that I needed to finish school in four years so that I could get on with my life. And that I would be behind and it would be hard to catch up if I skipped a semester. I didn’t have many cheerleaders for the first few years. These were hard things to hear from people I looked up to, but I didn’t believe any of them to be true, and here is why:
1. If you leave for a semester, you won’t come back…
Kids who don’t come back, don’t come back for different reasons. Not every situation is the same. For me, I fully believed that the education I would receive was worth the ticket price. I knew the value of a Christian education and of the high standards the professors had of their students, and I wanted that. So, I came back, even if it was only one semester out of the year.
2. You need to finish school in four years so that you can get on with your life…
WRONG. I have many friends who graduated in four years, and then realized they had no idea what they wanted to do. Some of them still have no idea. It’s too easy to be caught up in the “college bubble” and forget that there is a world out there to face when you finish school. By taking a little longer to finish, I was able to try out some things in my field and gain some experience, narrowing down my choices once I graduated. My life didn’t stop when I was a student, it was happening the entire time!
3. You’ll be behind and it will be hard to catch up…
I did take a few classes while out of school full-time but, it was never a problem to get back into the rhythm of things. I love school, and I love studying and learning, I certainly did not fall behind. Each semester that I “came back,” my GPA went up. For the last four semesters I had a 3.9 and higher. Being part of both the “real world” and the “college bubble” taught me to become more disciplined and organized, and it taught me about what to expect when I would be living on my own. If anything, in some ways I had a bit of an advantage.
The Fourth Principle: Loans are never an investment, not even for college.
More than anything, one of the myths I heard over and over was that college is an investment, and that it is okay to take a loan for something that is an investment.
Well, typically if you are investing in something, you are hoping to gain something even greater than what you put into it. So, they must mean that you’ll gain the satisfaction of having an education, or that an education is priceless, because in reality you are gaining huge amounts of loans that gain interest very quickly. A typical school loan is set up on a 10-20 YEAR payment plan. Have you ever looked at those numbers? By the time you make the last payment, your original debt has “earned” thousands of dollars. If you want to think of it as an investment, you are certainly gaining an education, but you’re also gaining MORE DEBT than you originally signed up for – which really isn’t gaining at all. What a waste it would be to spend years and years earning an income only to send a large percentage off as a loan payment – talk about not being able to “get on with your life!” I will always believe that my college education was worth every penny, but it is not, and never will be, worth the debt.
Another issue I have with this “loans for school are an investment” idea is that those same people will tell you that if you take $40,000 in loans during the course of your college career, you will make that your first year at your first job after graduation. This is a LIE young ones, DO NOT fall into this trap! If you go through college believing that there is a $40,000 a year job out there as soon as you graduate that will let you immediately pay off all of your loans, you are very sadly misled for a couple of reasons.
First, if you have any hope of living on your own (EVER), or getting married, $40,000 a year is going to disappear almost as soon as it comes in, if that much ever comes in at all. Where? Well, unless you plan to be a hermit your entire life while mooching off of your parents, you have to think about rent, or a mortgage, utilities like electricity and water, car repairs, renters/home owners, life, car, and health insurance (yes, ALL of them), gas, groceries, cell phones, and any pets you may have – which can be expensive. This doesn’t include contributing to a 401K, extra things like cable, internet, clothing, eating out with friends, or entertainment of any kind. Yep…that’s where it’s going to go. PLUS, if you’re married, all of these expenses DOUBLE!
Second, having a degree may make you more qualified, but it does not make you first in line, and it certainly doesn’t always guarantee you $40,000 a year. In fact the typical entry-level salary (which would be you) is about $30,000. Thinking about all of the living expenses and other post-graduation life events, it seems pretty darn UNLIKELY that you’ll be paying off all of those loans in a very short period of time.
The Fifth (And Final) Principle: Paying CASH is always a good investment
I knew that I would be much better off without loans in school, but I was curious as to the actual numbers. So I did some math and below is a chart showing just how effective taking my time to get through school to pay cash actually was compared to taking loans instead.
The results are SHOCKING!
Loans: The loan total is based on the actual amount of loans I would have taken from 2004-08 if I did not pay any cash toward my balance. The interest rate is set to 6.8%, the average for government loans.
No Loans: You will notice that the actual total tuition is different than the one in the Loans column. This is because tuition rose each year due to inflation and I did not graduate in four years like I would have if I had taken loans. Also, when I was married in 2009, I lived off campus, avoiding room and board fees.
IF I took Loans… Instead…
|2004: I would have taken loans.||2004: I worked and paid cash for school.|
|2005: I would have taken loans.||2005: I worked and paid cash for school.|
|2006: I would have taken loans.||2006: I worked and paid cash for school.|
|2007: I would have taken loans. I would not have met my husband because I would have been at school.||2007: I worked and paid cash for school. I met my husband when he was hired as my replacement at work so that I could go back to school|
|2008: I would have graduated with $43,540 in student loans. I would have begun making the payments each month which totals to $372.66.||2008: I worked and paid cash for school.|
|2009: I would be making $372.66 payments.||2009: I worked and paid cash for school. I married my husband and gained his $23,000 debt.|
|2010: I would be making $372.66 payments.||2010: I worked and paid cash for school. We made huge payments to the $23,000 debt.|
|2011: I would be making $372.66 payments.||2011: I graduated. I paid $44,670 in cash for school over seven years. We continued to make huge payments to the $23,000 debt.|
|2012: I would be making $372.66 payments.||2012: We paid off the LAST of our $23,000 debt! (Over eight years, we paid $67,670 total for school)|
|2013: I would be making $372.66 payments.||2013: WE’RE DEBT FREE!!!!|
|2014: I would be making $372.66 payments.||2014: WE’RE DEBT FREE!!!!|
|2015: I would be making $372.66 payments.||2015: WE’RE DEBT FREE!!!!|
|2016: would be making $372.66 payments.||2016: WE’RE DEBT FREE!!!!|
|2017: I would be making $372.66 payments.||2017: WE’RE DEBT FREE!!!!|
|2018: I would be making $372.66 payments.||2018: WE’RE DEBT FREE!!!!|
|2019: I would be making $372.66 payments.||2019: WE’RE DEBT FREE!!!!|
|2020: I would be making $372.66 payments.||2020: WE’RE DEBT FREE!!!!|
|2021: I would be making $372.66 payments.||2021: WE’RE DEBT FREE!!!!|
|2022: I would be making $372.66 payments.||2022: WE’RE DEBT FREE!!!!|
|2023: I would be making $372.66 payments.||2023: WE’RE DEBT FREE!!!!|
|2024: I would FINALLY make my last payment of $371.67.Cons: My total original $43,540 would have gained $28,009.73 in interest (more than my husband’s and the average students total student loan debt), which means I would have paid $71,549.73!I would be in debt for 20 years, including the four years of college that I was racking up the loans.I may not be able to get a job immediately, or afford the $372.66 payments each month.According to the Fin Aid calculator, I would need to earn $44,719.20a year to afford these payments.If I was married and my husband had loans, we may not be able to afford all of our loan payments.If we had other debt besides school, like credit cards, or if we had children, we may not be able to afford all of our loan payments.||2024: WE’RE DEBT FREE!!!!Cons: It took seven years to graduate.|
Don’t get to the end before you suffer the sticker shock of the damage that was being done while you were blissfully enjoying your college years. Instead, blissfully enjoy them because you know you don’t owe anyone a SINGLE PENNY! I have never felt as I did walking out of that chapel, seven years after I had entered the same chapel as a freshman having no concerns about paying for college, with degree in hand. It was an overwhelming sense of accomplishment because I was truly finished, and I didn’t have a $43,540 (plus interest!) bill attached to my diploma.
A plaque presented to me at graduation by the Fine Arts faculty. It reads:
“God is with those who persevere.”
There is so much truth in those very few words, and I may or may not have cried…a whole bunch.
P.S. I would like to get some real-life feedback. If you are interested, go to the online FinAid Calculator and enter the information they request. Then comment below (anonymously if you like) with #1 Your Total Debt, #2 Total Interest, #3 Payoff Time Period, #4 Total Monthly Payments, #5 Whether or not this is achievable.