8.16.2012

Should You Pay Off Interest On Your Student Loans While in School?

I should really be doing my crim law reading for later, but I got distracted (what else is new?). I've mentioned before that I wanted to pay off the interest on my student loans while I am in school. Subsidized loans were eliminated for graduate students as of July 2012 (I know, right before I started school) so with my unsubsidized federal loans, interest accrues right when the loans are disbursed. I have 2 loans so far - Stafford and Grad PLUS, and I will continually be taking money out until 2015. The interest has already started accruing, and it bothers me a lot.

Those who aren't financially savvy will think to themselves that they are only taking out a set amount for their unsubsidized loans. However, once interest is added, it is tacked onto your loan (principal) and then you will have to pay interest off of the initial loan amount PLUS interest!

Expensive tuition plus high interest rate plus not paying the interest while you are in school can equate to more than doubling the amount of your original loan once you finally get around to paying it all off.

I've done research on paying the interest on your student loans while in school and saw some articles stating that:

a) You shouldn't pay the interest on your loan because it is better to save it as emergency cash in a high-yield savings account; and

b) The money you are throwing at interest each month is so trivial (~$30/month) that it doesn't make much sense to do that.

I'm sure all of you in the PF community and those of you who are managing your money well are cringing at these statements. For fun, let's shoot down these arguments. Who the heck listens to advice on the internet anyway right??

My responses to the online "financial advice" -

a) My high-yield savings account is BARELY 1% right now - it sits at .8%. Now I'm sure that it makes zero sense at all to take out a loan at high (FIXED) interest rates of 6.8%-7.9% just to let it sit at a .8% savings account. I agree that one should have an emergency fund, but because I was able to save a substantial amount of money while I was working, I can cross this off of my list.

It wouldn't make sense for me to put the borrowed money anywhere since the markets are not returning anywhere near more than 7.9%. Well, maybe peer-to-peer lending, but that would be a huge risk that I'm not willing to take and I would have to deal with people who default, etc.

b) I can't even begin to think about what that person was thinking when they were handing out this advice. I feel bad for those who saw it and actually listened to it. This advice was given out in an actual forum for law students! First off, I'm not sure who pays $30 a month for interest these days on a loan for law school tuition. I calculated my interest just for this semester, and I have to pay a total of $149 a month just to pay the interest. Insane in the membrane! (Bonus points if you know what song that is from.)

Imagine if I were to not pay this $149/month this semester. Next semester I will be taking out more loans, and the interest will increase. This will happen each semester until the summer of 2015. Thinking about that just makes me want to faint.

Solutions

I previously wrote about scholarships, grants, financial aid, work-study programs, taking out less than you need, working, doing well in school, and using savings to pay for said interest. When you're in school full-time with a heavy workload, it's definitely hard to think about your finances, but I urge you to do it now while you still can.

Paying the interest on unsubsidized loans will lower your overall balance of the loan and will shorten your loan term considerably.

I honestly hate thinking about loans and depending on my job, because I "should" be focusing on school right now. Yet, this is important and even though repayment seems a bit far away from now, it will be here before I know. Why not alleviate your pain in the future by doing something about it now?

Thoughts

I'm honestly not sure why I felt so compelled to write this post today, but I hope that this struck a note with anyone in law school, med school, grad school, or even undergrad. This is the first time in my life that I've had a negative net worth, and to be honest, I'd rather not think about it. The easiest thing to do would be to just push it to the back of my head. When I first got an email from Nelnet (my loan servicer), I didn't touch it for a few days.

I thought to myself, I hate being in debt. I don't want to think about money right now, I'll deal with it later. But when you finally take the chance and take the time to look over your finances, budget, and what you can do to help yourself, you'll actually feel a lot better.

Do you have any other advice for someone with student loans?

8.09.2012

Keep Going Until You Cry

Hi guys! It's been a whirlwind of events since my last blog post. Seems to be a common theme these days huh? After the long 8-hour drive up to NorCal on Monday, I jumped right into orientation on Tuesday morning. I was nervous, yet excited, and met lots of surprisingly friendly people who all seemed to be in the same boat as myself.

A lot of my nerves are now calmed - I've just endured two 9-hour days full of inspiring presentations from very respectable alumni, professors, older law students, newer alumni, and various campus organizations. I still have 2 more days to go and I am beyond exhausted as I have a ton of homework/reading/briefing that I have been doing and still need to do before classes start next week.

Until You Cry...

I've had a lot of time to think during these presentations, and we even had our first meeting for our legal analysis, research and writing course. Although most would think that these topics and presentations are boring, I enjoyed every bit of it. As tired as I was and as much as I missed my BF and my life in San Diego, I can't help but think that I made the right decision and this school and this education was meant for me.

via
During every single presentation, I couldn't help but feel ecstatic at how I am finally on my way to achieve a goal I've had for so long. Every speaker congratulated us for getting this far and kept reminding us that only 202 of us were selected out of over 3,000 applications. It sounds so cheesy, but for once I am excited to go to school and my whole outlook on school has changed.

During these presentations, I actually had to fight back tears because I feel like I finally found my calling. I know I've talked about it constantly for years but talking about it is so much more different than actually going for it. I think that everyone should find their passion and follow their dreams until they end up fighting the urge to hold back your tears because you feel so fulfilled and passionate about what you're doing. Whether it's work, education, volunteering, or just being a good person - it's okay to be so involved and just cry sometimes. :)

Education as an Investment

Alumni were proud to call our law school their alma mater and have mentioned that it was such a great investment. They stated that they knew it was expensive and they knew that we were wondering if it was worth the money and hard work, and they kept saying it certainly was. This really made me think long and hard about the money that I will be paying back towards my student loans in the future.

I have come to terms that I will have a student loan payment for many years, and if I do not find a high-paying job that can accommodate all my other bills and cost of living, for much longer than I would want to pay them for. That's the worst case scenario, and I am okay with that. I think we all get caught up in the numbers sometimes and I know that I get a bit blinded (or sticker shocked) at times since I have to be careful not to spend my money unwisely. However, education is such an important investment and although we complain about student loan debt, I think the pros outweigh the cons.

The point of this post wasn't just to ramble, but to just remind myself and share with others that had I been strongly opposed to student loan debt and if I was just looking at law school tuition, I wouldn't be where I am right now. I wouldn't have been immersed in this feeling that I am doing what I am supposed to be doing in my life, and I would have always had that question of "What if?" in my mind. Not everyone can get scholarship money. Not everyone can work tons of hours while going to school just to pay for an expensive tuition. But we can all focus on our goals and what we want our future to look like, and we can always try.

Have you ever felt so happy with your life that you just wanted to cry? If not, what are you planning on doing to get there?

8.03.2012

PF Link Love: Fave Reads, I'm Moving Edition

Hi everyone! Happy Friday :) It's been way too long since I did a PF Link Love post! I officially am done with working full-time. Today is my last day at our San Diego location, and it really is bittersweet. On one hand, I have a ton of work that I still have to do and that I will continue doing when I move to Northern CA, but I also have a ton of other stuff on my mind. I hope you are ready for a longish post!

Life

I got my orientation schedule, my school schedule, orientation homework and homework for my classes already. I started nothing yet besides buying my books, which was already a huge pain. I'll be driving up this Sunday to my parents' house and reuniting with my old room. My parents "remodeled" aka painted it, so I'm kind of excited about that but I can't help but feel really overwhelmed and sad about leaving my boyfriend in San Diego! We've lived together for almost 7 years now and I'm pretty dependent on him. It will take a lot of getting used to when I move to be without him, but I know we'll be just fine. I also bought a backpack! It's a DaKine and it's pretty cool. It was only $30 too. I'm going to try not to stress out but I can't help it sometimes. There's a lot to do and not enough time.

My parents came over this past week and we hung out in Coronado for a mini vacay. We had a beach BBQ with my family as well as the BF's parents and cousins, we went jetskiing at Mission Bay, and they came over to pick up a lot of my stuff. A lot of the burden is off of my shoulders for packing so I am truly grateful for that. The BF and I went to a wedding last last Sunday for his cousin, and yesterday I drove to Anaheim to visit my dad and my cousins on that side of the family. It's really tough for me because I have way too many family members (I basically have 3 sets of parents since I have 2 sets and BF has 1 set).

Some pics!
wedding on Shelter Island
Heading towards Mission Bay
View of downtown SD from the Coronado Bridge
Beach BBQ in Coronado
Dim Sum with dad in Orange County
Jetskiing at Mission Bay
bye bye stuff!
Money

I'm so stressed out about money. It was so simple to just know that I was going to get the same amount every other Friday. I could easily pay off a credit card or my expenses for the past month or whatever. I didn't have to think about it or stress out about bills because I knew that I would always get that same amount of money in two weeks. Right now everything is coming into perspective for me and hitting me hard.

I had to spend:

  • $283 at the dentist
  • $130 for my root canal
  • $460 for my crown
  • $200 for my glasses and contacts
  • $500 on books for 1st semester
  • $287 for my dog's teeth cleaning and extractions
  • $200 for my last urgent care visit
I still need to pay/buy:
  • $300 for parking permit
  • $40 for locker
  • $200-$300 for 3 more books
  • I think I still owe my OBGYN some money ($200) for an ultrasound.

I also have been spending a lot on food (since I had a ton of vacations), gas, school supplies, and just fun stuff since I'll be going back to school. I need to take a look at my student budget and readjust everything. I need to take a deep breath and know that I am prepared to take on everything because I can use my savings to pay off all of these expenses (that I put on my CC so I could get rewards) and I will still be getting income from work and student loans for tuition.

July was the first month where I actually came out NEGATIVE for the first time in a looooong time. It depresses me, but at the same time, I feel good knowing I have savings to cover it and I'm still not broke. I still have money but yet I feel so broke. It's probably because I won't be getting that same paycheck every other week. My net worth is still positive but it's about to change when I get those loans disbursed to me and pay for tuition. I'll post my student budget in the near future. It will probably calm me down.

Work

Work has been going well, albeit freaking busy! Last week was my last week of full-time work. It was bittersweet but at the same time refreshing. I really hate being at my desk and inside for so long. It's mentally draining and I'm excited to get away from that. This week I started my 8 hours a week schedule and it's really nice. I'm not stressing as much as I normally do, and I have everything straightened out for when I move up north.

I feel really lucky that my company is accommodating me and all of my requests. I was originally going to work out of the San Leandro location, but it's a long 45 minute drive from my house. Since I'll only be going 1 or 2 days a week, I asked the GM if I could work out of a patient service center near my house. Luckily we have a ton of locations and labs so I can work at any of them. They are setting up my office, making me keys, and the IT guy is prepping my comp with all the programs I need. I feel very grateful that they are giving me this opportunity. I hope that I can keep working here all throughout school so I can come back as in-house counsel after I graduate. Would be my dream job...but let's just take it one step at a time.

PF LINK LOVE

I've been a bad blogger. Here are some of my favorite reads over the last couple of weeks.

Reframing Issue by Frugal Portland
The Dumbest Thing I Ever Bought on Credit by So Over Debt
Fast Food: When Buying to Get More Backfires by Money Life and More
Dating in the Workplace by Makin the Bacon
House Issues by Bog of Debt
Finding Time to Relax without Feeling Guilty by Savvy Financial Latina
How to Split an IRA or 401k in a Divorce by The Free Financial Advisor
Going to Private School Affected My Financial Life by LBee at Mr. CBB's
Entitled or Hard Earned by Below Her Means
The 3 Most Important Questions to Ask Yourself by Blonde on a Budget
Word for My 27th Year on Earth by Serendipity's Guide to Saving
My Way Isn't Right and Neither is Yours by Daily Money Shot
The Magic of Compounding Interest by LBee and the Money Tree
Things I've Learned About Myself While Travelling Alone by eemusings
Saving Money By Taking Your Own Lunches to Work by Modest Money
Road Trip of California on a Budget by Savvy Scot
Distinguish Yourself by Fearless Men
Why I Won't Scrimp on Life Insurance by Money Bulldog
Christmas in July by The Random Path
Being Cheap or Frugal - 12 Signs You've Gone Too Far by Work Save Live
Overcoming Envy - Why Do We Hate Other People's Success? by My Money Design
My Stupidest Financial Decision by Financial Confessions of  a Former Brat
And I Hit Rock Bottom by Bog of Debt
Levels of Financial Freedom by Leight PF
Tomorrow by See Debt Run
Why I Travel by Money After Graduation
Spending and Saving: Money & Our Kid by Master the Art of Saving
Paper Chain by JD Debt Free

Blog Updates

Thanks to Jill for pointing out that Business Insider featured my guest post I wrote for Aloysa at My Broken Coin, My Top 10 Worst Shopping Mistakes. I was extremely happy! Check out the feature here!

I've been thinking a lot about this blog and I just wanted to let you all know that I'm not disappearing or abandoning the blog, but I will definitely not be updating it as frequently. Between going to class for over 13 hours of the week, homework, working at our NorCal lab, and getting used to a long-distance relationship and living at home, I think I won't have time to update here regularly. When I do get the chance to blog, I'll probably post about my life and how stressed I am over money! Hope you'll all still hang around :)

I also wanted to let you guys know that I will try to comment on other blogs as much as I can, and I'll still try to do some link love posts here and there, but I have cut down considerably. I'm sorry for not being able to read up as much and comment. I really do need to catch up! I think I will have time next week. Also, I haven't been available on Twitter either but once I have time I will tweet posts as I usually do.

How is everyone enjoying their summer?
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