Avoid Student Debt To Do What You Want

There are likely more reasons to avoid student debt than Warren Buffett has dollars, or a mole has atoms, but this one to me is very important.

The Student Debt Problem

Students graduate now with over $25,000 of student debt. In Canada that is rough, but in the States there are horror stories of people graduating with over $200,000 of debt. No matter what there is a lot of debt moving into the work force.

These loans need to be paid back, luckily you will be working full-time and cashing those lottery style giant cheques every two weeks. Those payments don’t stand a chance and you will be free of them in no time! Right?

A $25,000 loan with a 4% interest rate will have $83 in interest every month plus whatever principal amount gets paid in the monthly payment. So about $100 every month. That is not so bad but save that for a year and you could have a pretty nice new laptop.

The average debt seems manageable, but any more than that and the payments can start creeping upwards. And the thing is that the more debt you have, the more money you need to make in order to pay it back. That is the point of all this.

Knowing What you Want to Do

I do not entirely know what I want to do after I graduate. Like a lot of people my aspirations have shifted many times over the years. I can remember wanting to be a professional wrestler, an NHL player, a pro football player (when I watch the CFL sometimes I insist that pro football player is still a possibility), an accountant, a personal trainer, and now I think physiotherapist. Really all I am certain about is that I am not certain about anything.

I still know that I would love to be a personal trainer. But I also really like having enough money to not worry about money. Part of the appeal of physiotherapy is that it would be a higher, more stable pay cheque. It is the more lucrative job financially. I have these thoughts without any debt. Add $25,000 debt and a dream job could be potentially ruled out.

The Debt/Income Expectation

Many go to university expecting that the years of earnings they give up will be replaced by higher earning years after graduating. I have held labour jobs and could be working one of them full-time right now, but I am in school hoping that the job I get with my degree will pay more than them. But if I had a huge debt to pay off I may be forced into a job I don’t want just to pay the bills. Beggars can’t be choosers.

I want to have no debt and even considerable savings when I graduate so that I can afford to be a bit picky, which with my degree I think I deserve. If I couldn’t get the job I trained for in a year, I want to have the choice of picking a lesser job or continuing my search for the dream job without having bills mounting up and swaying my decision.

By not having debt from school it gives the student options that otherwise are closed off. Freedom from debt leads to freedom elsewhere.


Avoid Student Debt To Do What You Want — 4 Comments

  1. I am not entirely following your logic. While high debt is not something any of us want, it is still better to have a profession and degree which will bring you more money than not having the debt and not having a degree.

    Have you read Robert Kiyosaki books? He speaks about mentality of being poor vs.mentality of rich people. It is not the money in your pocket that makesyou rich, it is the understanding of concepts.

    Now, I am not yet there with Robert in terms of net worth, but I am catching up. Back in school days the debt seemed like a high mountain. Oh my, I had $20,000 or so. It sure is hard to pay it off in 1-2-3 years. But what about long term? Do you realize your higher salary will lead to further increases, better jobs, future bonuses, etc which will dwarf the amount of school debt that scares you now? In 10 year’s time, would you care that you had 5k more in studet debt than what you desired back when you were in school?

    As said above, my $20000 seemed like a lot. Now it is a drop in a bucket compared to how much income it brought and continues to bring. This will especially be true if you choose a career in something you love and will therefore enjoy. Stop worrying about that debt, accept it as a cost of doing business. In a longer term (more than 5 years after graduation) you will be glad you did. That is of course a personal opinion and may have nothing to do with your actual situation. I’m sure many will disagree.

    • The way you explain it is correct as well but we are talking about two slightly different things.

      Yes if I get a Masters degree my earning potential is higher, but that is dependent on available jobs. Let’s say that I want to be a financial planner with my degree, but I can’t find work as one, or perhaps even any job in the field. If I have $20,000 of debt like you did, I would need to take a job just to afford the payments. The first job I could get may be in a grocery store, it may be as a labourer. If you are desperate for a job you will surely become underemployed. If I have savings built up I can take a part time job while I wait and continue my job search for my dream job.

      I can earn more with my degree as long as I am able to obtain a job that my degree warrants. Sadly for many graduates this is not the case. And it is not the cost of the degree, which is inevitable. I am in no way advocating not going to school. I am instead suggesting working part time, making good spending decisions, and saving your money as a student so you have the freedom to wait out your ideal job. I could be making 30K as a construction labourer right now but I am in school hoping I can make 50K in 3 years when I graduate. But it is possible I can’t get a job to pay that, and I may end up working as a construction labourer. This is a small deal if I have no debt, but with 20K of debt it is much more of a problem.

      Thanks for commenting Pavel.

  2. I have a friend who is a PT. Like you, she was torn between it and a less lucrative, related field. She wound up becoming a PT and does freelance gigs related to her passion (I can’t for the life of me remember what it is now).

    I graduated with over $30,000 in student loan debt and no usable degree. So I do regret mine. But if I had managed to get any usable career skills out of it, then I wouldn’t have regretted the debt at all.

    BTW, I loved the mole reference. Never knew there was more than 6.022×10^23 reasons not to take on student loan debt!

    • I had chemistry on the mind as you can tell, there are at least that many reasons.

      I really have a passion for personal training so I may do that as a part time, moonlighting thing. Or work a higher paying job until I have met all my financial goals so money is no longer an issue. Debt would keep me from doing what I love for a long time though.

      Thanks for the insight, and appreciating the mole quip. I was worried nobody would get it or catch it.

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