There Is No Student Loan Crisis

You wouldn’t think so would you? We hear constant doomsday tales that the world is about to end because of the 6 figure student loan debt every 20-something is carrying around. It’s simply impossible to graduate college in the United States without a trail of loans following. Right?

Wrong!

Let’s look at a few numbers:

Average amount of debt as of 2012: $29,400

Median amount of debt as of 2010: $8,500

Percentage of students with debt over $100,000: 4%

Those numbers are not nearly the horror show the media pretends they represent. The average is only $30,000, or the price of a brand new loaded Honda Accord. The average also is just that: an average. If I owe $200,000 for my degree and you owe $15,000, our average is $107,500. You can see how extreme borrowers distort the statistic.

Moving on to the median, which I think is a much more useful metric, we see even more good news. Half of students owe less than $8,500. That’s freakin’ amazing!

Finally, those with with the oft-whined about six-figure debt load only register 4% of borrowers.

But the best part, according to a report from the Brookings Institution, is that households with debt today are better off overall thanks to the increase in income provided by a college degree. This chart illustrates the point:

brookingspaymentincomeratio

The investment in an undergrad education has never been more worth it. Median weekly earnings for those holding a bachelor’s reached $1,108 in 2013. Median earnings for those with a high school diploma? $651.  An education in skilled labor (the trades) also has a high return on investment, given the relatively low cost of training.

For those with high levels of student loan debt, repayment plans are generous. Federal loans currently allow you to choose between the following plans:

  • Standard repayment
  • Graduated repayment
  • Income based
  • Pay-as-you-earn
  • Income contingent
  • Income sensitive
  • Extended*
  • Extended graduated*

If your income is low enough, a few of these plans can result in a payment due of $0.

These flexible plans are what allowed me to borrow the ridiculous sum of $70,000, yet have minimum payments of $475 with protection if I should lose my job. That amount is ~17% of my take-home income and I wish I had borrowed less.

The point is that I borrowed the money. I got the education I wanted, a fancy undergrad lifestyle filled with my own apartment, weekend drinking binges, and a study abroad trip to Europe. Those things cost money.

There is no student loan crisis. Most students are not borrowing extreme amounts. Most graduates are receiving an income boost that makes the return on investment extremely lucrative.

*You must owe $30,000 or more to be eligible for these plans. 

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Net Worth: January 2015

jan15networthJanuary 2015 Breakdown

CASH – Slight decrease here from December. I have around $2,500 in savings and want to bump this up to $3,000. That’s enough for over a month of living expenses.

ROTH – On hold while repaying debt.

TRAD IRA – Nothing exciting going on. It’s unlikely anything is contributed to this account until I change jobs.

CIVIC – Hey, a (random) increase! I think I’ve hit the point where depreciation will be much slower.

PLUS – Small decrease due to a regular monthly payment. However, I have some exciting plans for this loan that I’ll share later this month.

STAFFORD – Good: I found out my job qualifies for public service loan forgiveness. Bad: I’m limited to government or non-profit employers for 10 years. Worse: The forgiven amount would only be ~$5,000.

CIVIC LOAN – Due to my master plan for the PLUS loan, I may be able to pay this off in 2015!

PERKINS - No interest charges during the remaining 3 months of grace.

 

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December 2014 Net Worth

dec14networth

December 2014 Breakdown

CASH – Moving across the country was expensive, but I’ve been able to keep my cash reserves up. I’d like to have  $2,000 in checking to handle regular monthly bills and $5,000 in savings to handle any emergencies. All other income should be invested or pay down debt.

ROTH – I debate constantly whether I should contribute something to this every month. But then I think “No, you need to pay down your student loans!”

TRAD IRA – Nothing exciting going on. It’s unlikely anything is contributed to this account until I change jobs.

CIVIC – Slow and steady depreciation.

PLUS – Just entered repayment! My first scheduled payment is December 12th. This is my first priority to get rid of and I finally can now that my moving expenses are done.

STAFFORD – Just entered repayment on this as well! Already made the first scheduled payment. I chose the graduated standard repayment plan so my payments stay as low as possible. I can pay more on the PLUS this way.

CIVIC LOAN – Hate having this loan hang out. Reminds me I spent too much on a car. But the loan itself is extremely cheap at 2.9%. I’d love to pay it off by the end of summer 15 but I think I’d love seeing the PLUS balance fall more.

PERKINS - Grace period lasts 9 months.

Progress is still slow, but I’ve settled my new city and gotten used to the expenses that come along with living by yourself. Now I’m ready to kill this debt!

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Slice of Italy

I’m 2.5 years late, but I’m finally sharing some pictures from my study abroad semester in Torino, Italy. I was lucky to have 4 day weekends so I got to travel to other major European cities. I still frequently look back at this time in my life. I met incredible people and had some amazing experiences.  Here’s a taste:

Turin, Italy

torinogelato

Gelato stop the on the first day of classes. The shop was right beneath my apartment and I saw the owner, Johnny, almost everyday. This was taken with a friend’s iPhone when Instagram was “some app I found”.

torinoapartment

 View of my apartment. We were all told to adjust our expectations on living arrangements. Mainly that our apartments would be smaller than what we were used to. But mine was plenty big for my roommate and I. There’s a separate bedroom through the door by the fridge.

torinoarch

Olympic Arch constructed for the 2006 Winter Olympics. Located behind the Lingotto Mall (formerly a Fiat factory), just a few blocks from my apartment building.

Italian Riveria

cinqueterrehotelview

View of the Mediterranean Sea from my hotel room. We went on this field trip just a few weeks after arriving in Turin. This is when I realized I had made an awesome decision.

bottlewinecoast

 One of the best friends I made! Discovered we actually grew up only an hour away from each other. We were slightly tipsy at this point.

cinqueterredrink

We were waiting for the bus to come for the Cinque Terre trip and wanted a bite to eat. We saw a waiter walk by with this drink and knew we had to try one. It was amazing sangria and honestly this thing was like a breakfast snack. Loaded with fresh oranges, strawberries, and other fruit.

London, England

londonbrick

Cool brick I saw near Abbey Road. Something about the handwriting caught my eye. Best part of travel is when stuff like this pops up.

Paris, France

effieltowernight

We took a short boat cruise that went past the Eiffel Tower. Very cheap if I remember correctly and of course we had a few beers while the tour guide gave us info on the sights.

effielplatform

View from the 2nd (or 3rd?) platform on the Eiffel Tower. Advice: take the stairs if you’re able. You’ll save money and you can go your own pace.

Hamburg, Germany

airfranceflight

Doing the flight to Hamburg right! Good thing I was relaxed because I had a 45 minute layover at Charles de Gaulle airport. Not enough time!

germanybikepond

My German friend studied at my high school and we became good friends. I asked if I could come visit for a few days. He said “Sure!” and I got to see Hamburg from a native’s perspective.

Amsterdam, Netherlands

amsterdam

Amsterdam had a much smaller feel than I expected. Very fun vibe though.

Rome, Italy

colosseumpyramid

 Rome was probably my favorite trip. Not sure I could have ended the semester any better. Had a blast exploring the city, taking too many tequila shots, and biking through busy streets.

colosseum

Enjoying a casual walk through the Colosseum. I took 3 years of Latin in high school, so seeing this in real life was awesome.

romegroup

Rome close to Christmas is incredible and you can’t beat this group of people for a good time.

***

That semester had a big effect on my life. I had never left the United States before or traveled by myself. I learned a lot about independence, different cultures, and what I really valued. This is when I started to shift from wanting a high paying job after graduation, a fancy house & car, and all the other things we tell ourselves are evidence we’ve made it. Instead, I really just want time and enough frequent flyer miles to explore.

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I’m In Collections

medicalbillfolderI have an account in collections for a medical bill from over 2 years ago.

I know what you’re thinking. How could you BE so irresponsible? Pay your bills asshole! 

First we have to rewind all the way back to May 2012. I woke up one morning and felt terrible. Fatigued, low fever, and pain in my lower stomach. I laid in bed checking out WebMD for several agonizing hours – which confirmed I was suffering from 20 different illnesses and diseases. The pain became so severe I drove to the hospital. Not the safest decision looking back.

When I got there, I realized I didn’t have my health insurance card. No big deal, right? My mom arrived; someone instructed her to call the next day to provide insurance info.

I had my appendix removed and went home the next day. The story should end there, but of course it doesn’t.

In February 2014, a woman called and claimed I owed an anesthesia provider $1,500. I told her I didn’t because A) I never got a bill and B) I have really good insurance. She  explained that because the hospital didn’t get my insurance info when I first arrived, they never sent it to the provider. WTF.

The provider finally wrote it off as bad debt and now it belongs to a collection agency.

I received a scary looking letter in the beginning of May that (in all capital letters lol) said if payment was not received by May 31st, the account would be reported to the credit bureaus. May came and went and nothing was reported. I received an identical letter in June, but the date was changed to June 30th. Still nothing reported right now, but I’m thinking they’re going to follow through anytime.

The idiot at the collection agency has spent hours of her life telling me how hard the anesthesia provider tried to get in contact with me. Sent 3 letters. To the wrong address. Obviously those were returned. They had my cellphone number. Never called. She tried to be a hard ass and claim they have the original admission records and they contacted me according to the information I provided*.  Just for shits and gigs, I ordered those records. They had my mom and dad’s phone numbers as well.

***

Two weeks ago I sent a debt validation letter. Certified mail, return receipt requested. Cost me like 6 bucks. Debt validation is when you send a letter that asks the collection agency to prove you owe the debt. This is the first step in the dispute process.

Think about it. If a stranger came up to on the street and said, “Hey, you owe me $2,000 for a medical/credit card/electric bill from 2012.” You’d laugh in their face right? You’d want some proof before you starting writing checks.

A debt validation letter can get you that proof. If they don’t have it or won’t provide it, you’ll have an easier time telling them to piss off.

I see this going down 1 of 3 ways:

#1 My letters and previous phone conversation convince them they won’t receive any money and they forget I exist.

#2 They report to the credit bureaus. My only real play if this happens is to dispute it with the bureaus. I’ve read that the bureaus will cave if you send enough paperwork. I could eventually negotiate a pay-for-delete with the collection agency. Just need to write a letter saying I’ll pay you X if you agree to remove all records of this account.

My credit score would drop ~100 points. No need to panic, I’ll still have a ~650. I have no plans to buy a home or finance a car, so a bad credit score would be manageable. The iffy part is renting an apartment. Most landlords probably don’t care about an old medical debt. But it could scare away some.

#3 Same as scenario 2, but they actually sue me to collect. F that. Court would be an interesting experience but not one I’d like to have.

A week has gone by since the latest deadline and still no damage done to my credit. That’s a good sign! My letter must have worked or they’re gearing up to bring out the big guns.

*Except I didn’t provide the wrong information. My dad was standing right next to me as I rattled off my address.

To be continued…

Image credit: CX2

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July 2014 Net Worth

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July 2014 Breakdown

CASH – Continuing to save for a 2 week Denver job hunt. If I come up empty handed, I’ll regroup @ home and have enough cash to pay my bills for few months until I land something. I’m aiming to have $5,000-$10,000 before moving out.

ROTH – I know my account changes don’t look very drastic – just $24 from last month until now. But if I had started with 10K, it would have grown to $10,300. Investing won’t feel significant until you get into the 5 and 6 digit range. Once there though, you could be up or down thousands of dollars over the course of 1 day!

OPERS – Transfer just completed today. This is now a traditional IRA at Vanguard.

CIVIC – Love how slowly the Civic is losing value. I did a quick search and 2004 Civics are selling for ~$6,000. If that holds for my 2010, I’ll be in great shape in 2020. She’ll still have a reasonable value and roughly 120,000 miles. That’s practically brand new for a Civic! ;)

PLUS – Seeing the ~$300 monthly interest accumulate stresses me out. Don’t like this at all. I’m so tempted to throw 2K at this but I’m trying to hold off for 2 months while I job hunt.

STAFFORD – The interest difference between this loan and the PLUS makes me sad. :(

CIVIC LOAN – Want to pay this down just to get rid of it, but I’m holding out until I get my work/living situation figured out. I know I should just let it ride at 2.94% but…car loans are bad!

PERKINS - Grace period lasts 9 months.

Finally! After a couple months of questionable progress, I made some headway and actually increased my net worth. Now I need to be patient while I job search. The debt will start melting away soon enough.

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Relocating: Good or Bad Idea?

I’ve been done with school for 2 months now. I’m still working at my internship, after turning down a permanent offer, until I find the job I want. I have 6 months before I have to stop working. Tick-tock!

I make plenty of money to cover my low expenses. But I’m well aware that I have to move on. The sooner the better; I’m making 10K-20K less than what I expect to earn in a post-grad job.

The question is where. I probably won’t get a job in my immediate area. Tech isn’t a big industry here. I would be more likely to get a job in Dayton or Columbus. I’ve given a lot of thought to moving to Denver too because of the better job market, nicer weather, and to see a new part of the country.

I’m balancing paying off debt & keeping expenses low with designing a lifestyle I want. I change my mind every couple of days. It’s driving me insane.

If I work in Dayton or Columbus, I can live at home for free and rapidly pay down my student loans. Parts of Dayton wouldn’t be too bad, around 40 minutes. Columbus is 60 at a minimum. F that.  I’d pay my student loans down quicker, but at the cost of losing more time and and using up my car’s lifespan.

I doubt commuting all the way to Columbus works for more than a few months. I’d save up some money and move out. I have other things I want to do besides work and drive to work like: blog, train for a marathon, read, etc. I can’t realistically consider this an option.

Looking at rent prices, I’ll be paying almost the same regardless of where I live. The differences are whether I have roommates, studio vs. 1 bedroom, newer building, etc. I’m fine with living in a small cramped old studio in Denver if that’s what it takes. When I think about this, I lean towards Denver or Columbus. I have no desire to live in Dayton.

The math makes me reverse my decision. Estimating my income and expenses, I would pay ALL my loans off in 2018 if I continue to live at home and 2024 if I move. To achieve my 2020 goal of eliminating student loans, I’d have to earn more money in Denver or Columbus at some point. I’m optimistic I’ll receive raises and earn some side hustle income but there’s no guarantee.

Screen Shot 2014-06-29 at 8.52.56 PM

I’m stuck deciding if being debt free is worth sacrificing having my own place and a less car oriented lifestyle. Finally, I’m not sure it’s fair for me to continue living at home for free when I could afford to move out but choose not to.

My plan (as I write this haha) is to visit Denver in a few weeks and stay with a friend. Try to interview and get a job offer. If the offer is decent, I think I’m going to take it. I’ll move, crush it at my job, and do something to earn extra income in pursuit of that 2020 debt free goal. I’d love to hear if anybody out there has advice or a different perspective I haven’t considered!

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Don’t Forget Your Old Retirement Plan

After months of procrastinating and paying too many $4.00 monthly account fees, I finally did something about the retirement account I had with an old employer. It’s one of those things I knew needed to be done, but never prioritized. Given how often we switch jobs now (I think the latest count is around 8), this is something we should all get used to doing.

When you have a typical retirement account – 401k, 403b, 457, or TSP (if you’re a fed) – you have a few options when you leave your employer:

Forge about it. The money is still yours, you just leave it with your old company’s account provider. It’ll stay invested however you chose and chill. A lot of retirement plans have expensive investment options though so those fees will continue to be charged*. You risk losing track of the account over time as you move through your career.

Rollover. You move the funds from your employer’s provider to a traditional individual retirement plan. You can pick any provider you want for this. Etrade, Fidelity, Charles Schwab, Vanguard, etc. I would go with Vanguard since they have the lowest fees in the industry but Schwab and Fidelity have good options too.

Cash that baby out. Take your money and run! You can request a check to liquidate your account. You’ll pay regular income taxes and a 10% penalty fee because you’re not 59 1/2. Take whatever amount you think you’re getting and subtract about 20-35%. You might want to cash out. I’ve done the research for you and figured out the correct course of action:

“My account balance will let me buy a new car. Right now I’m driving a used car. Should I cash out?”

NO.

“I’ve been dying to go on a vacation. It’ll only cost 10K. That won’t go very far in retirement anyway**. Should I cash out?”

NO.

“Kohl’s and Target are having a sale on the SAME DAY!! Should I cash out?”

NO.

You may cash out if doing so would prevent death or bodily harm and you have no other source of funds. But max out your credit cards first. Your 401k is protected in bankruptcy so don’t give up that sweet benefit.

Given the current fee situation and craziness of a cash out, I initiated the rollover of my old employer’s retirement plan to a traditional IRA at Vanguard. I’m investing in the 2055 target date fund – the same fund I chose in my Roth IRA. I operate on a set-it-and-forget-it investing philosophy.

*Does not apply to the Thrift Savings Plan. The TSP is a crazy sweet account with extremely inexpensive funds. 

**$10,000 could grow to $76,000 after 30 years if you earn 7%. 

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June 2014 Net Worth

june2014networth

 June 2014 Breakdown

CASH – Up over $1,000! May was a 3 paycheck month. I’m storing up cash right now to prepare for the possibility of moving to the Denver area (better job market, warmer, new adventure).

ROTH – Invested 100% into the Vanguard Target 2055 Retirement Fund (VFFVX).

OPERS – Transfer to a traditional IRA hasn’t finished processing yet. Consolidating accounts/institutions is the end goal.

CIVIC – Civic appears to be holding its value pretty well.

PLUS – Anxious to get a new job, move, and start paying this sucker off.

STAFFORD – Typical interest accrual. I’ll be putting this loan on whichever plan results in the lowest payment. This will free up cash to pay down the higher interest PLUS loan.

CIVIC LOAN – Slowly but surely. Toying with the idea of paying this off quickly when I start my new job. The interest rate is under 3%, but I’m thinking the motivation factor would be huge and I would have the cash to throw at my student loan. But if something came up, I could use that cash as a kind of emergency fund.

PERKINS - Grace period lasts 9 months so it’s on the back burner until then.

I’m in limbo. I’m back working full-time and my expenses are minimal for now. Aiming to have a job in Denver by the end of July and will then start killing my debt and building up some assets.

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I Borrowed How Much for College?

Photo by Andrew BossiI’m officially a college graduate! I received my empty diploma cover (our graduation ceremony is held before final grades are submitted) a few weeks ago. Since then, not much has changed. Mostly I just feel relieved. I was stressed out near the end!

Now that I’ve done with school, it’s time to pay for it. Student loan repayment begins in 6 months. The damage:

Parent PLUS: $42,283

Stafford:  $29,095

Perkins: $2,000

Total: $73,378!!!

Wow. That’s a fuckton of money!

No, college doesn’t have to be this expensive. As they say, “mistakes were made”. Interestingly enough, I started college in good shape. I had something like $5,000 in cash from working all summer and high school graduation gifts and decided not to live on campus. But my spending kept rising (books, eating out, gas, “stuff”) and I was going deeper into debt to pay tuition. I studied abroad too. I don’t regret it, but I could have done it cheaper.

The real mistake was moving into my own apartment during sophomore year. Rent was something crazy like $650. Moving out meant I had to buy a TV for the living room, furniture, and all the other stuff you “need” when you have your own place. At one point I even carried some credit card debt at 0%. How dumb could I be?

I finally woke up at the end of fall semester junior year and moved back home. No more rent! Or utilities! Or groceries!

It causes me physical pain to say this, but I’d estimate $20,000 or more  is completely stupid spending.

I could bury my head in the sand.

Make the smallest minimum payments possible. Pay tens of thousands of dollars in interest. Finish paying for my education in 2039.

No thanks.

Instead, I’m aiming to be debt free by January 2020.

Operation Kill Student Loan Debt begins as soon as I land my 1st job. This is not the time to party, but a time to get serious, work my a$$ off, and pay down this debt. The rough plan is to A) Live like a (broke) college student and B) Pay as much on the higher interest PLUS loan as possible while paying the minimum on the lower interest loans.

If you’ve recently graduated, figure out your game plan nowYour debt will be waiting for you.

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