Are you thinking about getting your first degree, or perhaps a master’s? We all know paying for college is expensive and sometimes it feels nearly impossible to think of paying cash all the way through. I felt that way once I got into my bachelor’s degree almost a decade back. I did my research and figured out exactly how much per month I would need to pay to ensure my student loan was paid back at the end of each term, and if paid back within six months, any accrued interest would reverse. Sounds like a great plan, right?
Well, things didn’t start out too well. Once school started, I also wanted a new truck. Instead of just driving my nine-year old, 2005 Altima, I ran up a $34,000 auto loan, which I rationalized by talking about the low interest rate I received, as if this validated spending roughly two-thirds of my annual salary at the time. That first great big $480 loan payment came due a month and a half later and I was deep in auto and student loan debt, with no way out for a long time. With ballooning debt, I pretty much ignored my new school loans and pretended like they didn’t exist.
The one saving grace, or so I thought, was the $5,250 tax-free, annual tuition reimbursement I had received from my employer. The problem here was that I was taking loans for education and then used the later reimbursements for other things I wanted. Again, no discipline on my part and a mistake that still haunts me today.
Fast forward about 18 months and I was now receiving job offers to get into accounting. I was excited to leave retail, but would now owe back nearly $10,000 in tuition reimbursement because I left before completing a year of service. How would I pay this back? Drumroll! Tap my 401(k) proceeds to pay them back. While better than taking out more debt, it was a serious blow to my retirement savings, that I’m still recovering from because of the missed growth from 2014-2019.
I did wise up around late 2015. I moved up through a couple different positions and increased my income. I made it a point to stop using student loans once I got stabilized at my job and got some permanent tuition reimbursement going. Now, I use that reimbursement to fund my next semester and any overages, I make up in cash. My last student loan was on December 27, 2015, and I managed to pay cash through Graduation in September 2016. I managed to pay about $10,000 out of pocket, so I walked with $42,000 in federal student loans.
When I went back for my master’s in 2018, I had a new plan! I only went back when I had a job that would pay for my degree and if I could make up any differences between reimbursements and costs. I also held myself to having the cash to pay my tuition when it was due, or a credit card paid off, in full a month after before interest accrued. This strategy has worked very well. I am in my last semester of my master’s program and have paid off over $4,000 of old student loan debt and paid for current school.
Each time I had a plan, but what was different? Execution and sticking to the plan. At age 32, I still felt compelled to have new things and not reign in the spending, while today, at 39, I kept driving my paid off truck, put tuition reimbursement back into paying for the current semester by floating a semester on my rewards card for a cycle. I did use credit card debt, but very carefully and have always paid it off without interest and never used a balance transfer to achieve my goal here. I also had the cash on-hand to clean up the mess quickly and wasn’t hoping a next paycheck could cover it. One other difference was going to a state school for my masters instead of an online private school. University of Phoenix, where I earned my undergraduate degree, charged approximately $1,900 per upper division course for tuition and fees. At my state school, graduate classes have been about $1,300 per class for a graduate degree. I won’t even get into how many great people I’ve met who I think will be instrumental in my career in the future as we all graduate hopefully move into management roles.
What tips can you share on getting through college debt-free? If you have loans now or payments coming due soon, how will you manage the extra financial weight?