Saturday, April 19, 2008

Aren't Student Loans a Way of Life Just Like a Car Payment?

I am in graduate school and I want to get a PhD so I am far away from being finished paying for school. Being obsessed with personal finance does not help when I have to borrow loans to pay for my schooling. Plus I attend a private Christian college so the tuition is slightly more than a regular college. I have 26,000 in school loans already that I am going to need to pay back and it stresses me out thinking that those are just sitting there waiting for me when I finish. I assume I will add another 26,000 when all is said and done. I have been weighing how to handle this for months:

I cannot pay it back yet because sold my company and I am not working right now to pursue school. This is where most people are. They are going to school and postpone paying back their loans until after they graduate and get a job. This seems like impending doom to me. I don't like the idea of having to fork out $800 a month once I am working. Seems like it goes against going back to school to earn a better living. Seems like I went back to school to pay back $800 a month.

I could pay for my education as I go. I did this as an undergrad. Back when I had help from my parents, I was in my early 20's, no husband, no pets, no kids,, no responsibilities. Unlikely I can do that now since we are on a fixed income and don't have a lot of surplus. Sure I am saving a few hundred a month towards personal savings and retirement accounts and I could carve out a little from that but I feel like we are not contributing enough to those outlets so I would be stressed if I had to cut back on them some more. I like adding to savings every month and I like adding to my retirement accounts. They are the safety nets for our future. Planning is the secret of frugality.

Okay you say, well ditch the private Christian college. Go to a less expensive state run school. I could but it isn't my preference. I like the idea of learning about theology while I am learning about my field. It is like hitting two birds with one stone. I am growing spiritually while learning about other things. Seems like a bargain so to speak in terms of getting bang for my buck. I did attend a secular college as an undergrad and it was fine but I feel like attending this school for graduate work has made a tremendous difference in my enjoying my education. I believe it has added to my life. So ditching this school would be a last resort.

Okay well aren't student loans a way of life just like a car payment? No they are not and neither is the car payment. When I say I want to be debt free I mean debt free. There seems to be some sort of slavery associated with owing others and I do not like it. Freedom is having the money to do what you want and I value that so much so that I am willing to not go into debt to keep it.

I visit my student loan accounts on line a lot to look at the impending doom. I am not even starting to pay them back but as I look at the figures going up I just shake my head. There has got to be a way out, or through this.

Here is what I have decided. We purchased our home 6 years ago before the big housing bubble. We were unbelievably fortunate to get a builder's house with all kind of upgrades that is unique (a Victoria reproduction) with all the bells and whistles close to a major metropolitan town but just on the outskirts for cheap. Since it is half an hour outside of this major city it is still considered rural so the housing market had not caught up with the major city yet. We stand to make close to $300,000 profit when we sell this house in two or three years. There is my escape. As badly as I want to use that to build our new home mortgage free and throw the rest into an investment or savings I know I will have to pay back these student loans. I like my freedom so I will do it no matter how much it will hurt. I will be giving away part of my house that I plan to build to pay back a debt that I borrow to go to school. Ouch! But freedom is on the horizon!

Okay you say, that is great for you but I don't have a house I can sell for profit like that so I am stuck paying it back when I graduate. If I did not have the option of selling the house I would start to snowflake immediately, even before I was required to pay back the loan. You can read about snowflaking here. I would get a part time job or bring in some extra income and slate it nly for student loan payback. I would have to do something to get started on it because the idea of that waiting for me might be enough to make me think it just wasn't worth it. At least chinking away at the loans would feel like progress. I would divert some of the funds from the savings and from retirement and put it words to student loans each month. I would also start taking my tax refunds, whatever the amounts and use it for student loans or to pay tuition. I would also start using any windfalls that I received towards the loans or tuition.

Well, gosh ChouChou, wouldn't my life be terrible since I would have to give any extra money over to my education? Yes, for a little while but just think about the fact that you will be able to breathe a sigh of relief one day when you have your education paid in full and can longer be a slave to student loans. Won't it be worth it?

1 comment:

Jerry said...

ChouChou, that is totally motivating and it leads me to think of our family's situation. We are moving this summer to Europe for me to finish my graduate education, and it's a real financial stressor... as you know! Still, we also have the insurance that we will sell our house (sometime - hopefully soon!) and it will pay for the tuition. Regardless, we already have plenty of student loans, and we want to minimize them as much as possible from here on out (hence, the move to Europe). Thanks for your insights, this is a valuable blog and a fun read!