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35 Comments

  1. So much yes to this! Make interest-free payments on those loans while you can. I know some people who saved up a crapton of cash *before* they went to college so they could pay for it outright. If you budget carefully, choose a profitable major, and go to an affordable school, you can get a degree relatively cheaply.

    • Hi Mrs. Picky Pincher,

      Thanks for the comment! You’ve got the idea!! Too many of my friends blindly take out student loans and pick an easier major so they treat college as a 4 (or more) year vacation. No wonder there is such an issue with student loans nowadays.

      • When I went to college, you went from high school into a 4-year or community college without giving it much thought. For some it was a vacation, for others it was a bridge to adulthood. Many went without having serious career ambitions or preferences. These days, the costs force you to take your career path more seriously, which in a way, is a good thing.

        • Mr. Groovy

          I treated my first round of college as a 5-year vacation. Huge mistake. Not in a money sense, fortunately, but in an opportunity sense. I went to Buffalo University from 1979 to 1984. College back then was still cheap. During those five years I racked up less than $6K in student loan debt. But I left UB without any skills or discipline. And that really hurt. I wasn’t able to turn my financial life around until I was almost 40. Ouch. Message to young people: Listen to Lauren. Don’t treat college as a 5-year bacchanal. Take it very seriously on the academic front and the ROI front.

  2. My college had a generous meal plan and at the end of the semester I always had probably $300 left that’s essentially money I already paid for. During the last few weeks I went into the university store and brought $50 of such and such and resold it at a loss to someone who wanted random groceries out of campus for like $20. But I didn’t need groceries, I wanted cash! It’s pretty easy to squirrel away $50 if you get creative hehe.

    Despite the dismal ROI, in college I did learn to hustle like a poor cheapskate.

  3. Haha I really like your intro. When I was in grad school, some students complained that they were in so much debt. But they had all of the latest gadgets you can think of in the market.

    I was really puzzled as to why they didn’t just save the money and start paying off their debt more aggressively. I didn’t know their stories, but I’ve met people who live like they don’t owe anyone anything although they do. Being frugal and saving up to pay off debt is key to being an early starter in life.

    • Exactly! So many people don’t realize how much money they could save if they work to pay off their debt faster instead of splurging on luxuries. Thanks for commenting!

  4. “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

    It’s something I learned early on. And I’m happy I did, because I’ve been able to harness the power of compound interest to be for me, and not against me. Thanks for the post!

    • I love that quote – it’s so true! Compound interest can either drain your finances or make you a millionaire. I guess it’s up to us to figure out how to make it the latter case. Thanks for commenting Tim!

      • Mr. Groovy

        I wasn’t aware of the second half of Einstein’s famous quote. Thanks, Tim. This sums up the financial “game” pretty succinctly. Do you want to be punished by compound interest or aided by it? I’m with Lauren on this one. The sooner you make compound interest your ally, the better.

  5. I was totally guilty of burying my head in the sand on this one. I have no idea how much my initial loans were for, and I consolidated some and had them on income based repayment for a while, so I just knew the huge numbers at the end.
    It all worked out eventually once I got a grown-up job, and working while in med school would have been really difficult with a crazy schedule, but it would be interesting if I could find those numbers now and see how much interest I paid.

    • I admittedly was in the same situation early off in college. I really had no clue how my student loans worked or even how interest worked in general! I’m glad you figured it all out! Thanks for commenting 🙂

  6. This is a fantastic concept. We didn’t pay off our student loans until after we got married. Really didn’t even have any grasp of interest and how much we owed until then. I don’t want to know how much was lost in interest.

  7. I had never heard of this concept, but it’s brilliant. I was unaware in college that interest was accumulating on my loans, and I didn’t start paying them back until 6 months after I graduated. I wish I had known this back then! I’m sure this will help a lot of students out there.

    • Mr. Groovy

      It is brilliant. With just a little foresight and hustle, one could do themselves a huge favor. Sacrifice two nights of debauchery a month and save 20% on your unsubsidized student loans? Sounds good to me. Thanks for stopping by, Matt.

  8. If only I’d thought about paying that off during those years, I could’ve saved myself a lot of coin. Alas, I would’ve found a way to say I can’t afford it while still going out at least once or twice a week with friends.

    I still have what I refer to as my “squirrel fund” for what you suggested – squirreling money away, mostly just from myself. 🙂

    • Mr. Groovy

      I hear ya, Mr. SSC. While fumbling toward my undergraduate degree, I was often late with the rent and my share of utility bills. I also had a nagging difficulty coming up with some coinage for the laundromat. But I always had money for beer and tacos. Meh.

  9. Yep, that capitalized interest is a killer, you know you made a mistake when your interest becomes principal and starts getting interest

    Also – don’t “take advantage” of the 6 month grace period after you graduate – start paying day 1 (provided you have a job)

    • Mrs. Groovy

      That interest is indeed a killer, AE. It’s worse than The Blob! (As per IMDb, the blob was “an alien lifeform that consumes everything in its path as it grows and grows”.)

  10. WOW. I guess I didn’t realize – not having a college degree – that interest accrued on student loans while you were still in school!!!! I’m SO glad I know this now. Our second oldest is entering 9th grade this fall and is headed to school for a degree in elementary education. This valuable piece of information will definitely change how we do things: thank you!!!!!

    • Mrs. Groovy

      Excellent! Hopefully they won’t be in too much debt with the scholarships they’re getting, Brian. But this could ease the situation.

  11. Another excellent article Lauren. That is a great idea to pay as you go to lessen the blow of interest. However, I think I may have been better off if I started investing during college. The ROI from investments are probably going to be higher than the relatively low interest rates on student loans. So over the course of 4 or 5 years, I would have made more than I would have saved myself paying off the interest. Both great strategies. Probably comes down to psychological or emotional factors about debt and individual situations.

    • Mrs. Groovy

      Interesting theory, DD. I think, emotionally and psychologically, it would be very difficult to invest while in school and racking up debt. Maybe knowing what we I know NOW I could.

      For me it’s not always about the numbers. And I also feel that when you get out of college and begin your work life, the less debt you have, the more you can focus on the right career choices.

  12. Great advice! I did this when I got my MBA (actually, I paid down some principal as well) and it helped so much! It even gave me the confidence to cash flow the last few semesters. When I finished up my degree, I was able to knock out the debt in a handful of months by applying every windfall towards my student debt.

    • Mrs. Groovy

      You played it right, Emily. Well done!

      I’m curious, how did you know to do this? Who were you having financial conversations with at the time?