Things every high school senior should know about college.

I’ve been mentoring the same group of high school boys for four years. They are seniors now, and most of them are in the midst of receiving their college acceptance/rejection letters in the mail. At one of my recent Bible studies I asked the guys if they would be interested in doing a “college prep” night where I shared with them some insights on the college experience. Here’s what I’ve got so far to share…

Do look in to going to a public school. I made the decision to go private and man oh man did I pay for that choice. My school ran about $30k/yr, quite a bit different than the $5K-10k/yr public school options at the time. Looking back I wish I would have considered going to a state school. It’s okay though, I don’t regret my choice as I had the best four years of my life, but I SHOULD have explored public options more carefully.

Don’t drop out. Yeah that’s right. If you start college…finish. I can’t tell you how many kids I went to school with that didn’t come back after the first year. They paid $30K for that one year, and don’t have a degree to show for it. School can be hard, life happens, and money will be an issue, but you better do everything in your power to make sure you graduate from somewhere, even if it’s your local community college.

Do work part time. I don’t care if you are working 5hrs/wk or 40hrs/wk, but try and make some money. I know, being a full time student can be stressful, but I bet part of that stress comes from being broke. You don’t need to be earning enough to contribute to a Roth IRA (although that would definitely be sexy), I just want you to be able to cover the majority of your personal expenses (food, clothes, school stuff, etc). It also will give you something to put on your resume come graduation time. Think about it, if you were on a hiring panel would you hire someone who graduated college with a 3.5 GPA and no work experience or someone with a 3.5 GPA who also had a job during those four years? I’m going with the latter.

Don’t use that fricken credit card you signed up for. Yeah, that’s right. I’ve been watching you. Some dude at a booth said “Hey fill out an application for this credit card and we will give you this frisbee” and you filled it out didn’t you…DIDN’T YOU!? I too took advantage of a “free shirt” offer, but I actually lied on the application and input all fake info (which I think is actually a crime, but I didn’t know it at the time). Fortunately, I never accumulated a credit card balance while in school and you need to do the same. This is a non-negotiable. Credit cards can not be the means by which you provide yourself food and textbooks.

Do get good grades. Sounds like a no brainer right? But are you really applying yourself in all of your classes. I sure didn’t. In fact I got an A in Organic Chemistry, but a B in Introduction to Art. I picked and chose which classes I wanted to succeed in and where I was okay falling short. I wish I could go back in time and try just a little bit harder. When you graduate your GPA is going to be a huge bartering tool for you. Yes, your college GPA will become less important as you establish yourself in the work place, but until that time comes, it is your most valuable asset. If you graduated with honors don’t be shy about telling your prospective employers about it during an interview. It shows that you are dedicated to working hard and doing well.

Don’t grow up too fast. If you are the typical 20-something college student you have a responsibility requirement to act like it. Have fun. Pull stupid pranks on your dorm mates. Stay up really late and watch movies. Once you graduate college, you have to enter the 9-5 world, and let me tell you… it ain’t pretty. Midnight burrito runs are a thing of the past. Enjoy the college lifestyle.

Do take advantage of EVERYTHING your school has to offer. I was heavily involved in various college activities. Sporting events, clubs, organizations, all at your fingertip. There are so many FREE programs available to college students, you would have to be stupid to not take advantage of them. You aren’t stupid, are you?

Don’t take out $100,000 in student loan debt to become a teacher. If you know exactly what you want to do with your life (teacher, socialist worker, nurse, etc) then you need to think about the average pay for that position and how much student loan debt you will have. Don’t be naive and take out $25,000 each year in loans, only to graduate and become a Kindergarten teacher who makes $35,000/year (if you even get a job right away). You will literally be in debt for just about ever, and probably doomed to live in your parents basement until your 40.

Here is a general rule I would use; the total amount of your student loans should be less than what you expect to make annually in your chosen profession. If that’s not the case, change schools or change majors.

So there ya have it, some of my thoughts on the college experience. Take them with a grain of salt as they are only my opinions, and according to Girl Ninja, my opinion means nothing.

I’d love for you to share a few MUST SHARE items that I need to address when I meet with these high school kids. What is something that your 18 year old self would have liked to know?

I’ll still be so pissed if student loans are forgiven.

Back in the Occupy Wall Street hayday, Circa 2011, I wrote my 8th most popular post ever. It was simply titled “I’ll be so pissed if Student loans are forgiven“.

Yesterday I read an article by the New Yorker titled “A Student-Debt Revolt Begins“. Here’s a snippet from the article, but make sure to click through and read the whole piece.

On Monday, Heiney and fourteen other people who took out loans to attend Corinthian announced that they are going on a “debt strike,” and will stop repaying their loans. They believe that they have both ethical and legal grounds for what appears to be an unprecedented collective action against the debt charged to students who attended Corinthian schools, and they are also making a broader statement about the trillion dollars of student debt owed throughout the country.

If you took the time to read the whole piece, you’ll learn that it’s pretty clear Corinthian was likely not putting the students’ needs first. But then again, what would one expect from a for-profit entity? Of course the executives primary concerns are going to be how much money they will make, and how much money they can make for their investors.

It’s also abundantly clear Corinthian was taking advantage of the government’s generosity just as much, if not more, than they were taking advantage of their students.

Does this sound familiar? How about just a few years ago when all the financial institutions utilized predatory lending practices, knowing the fed was there to bail the bank out in the event the crap hit the fan.

Tons of upside. Virtually no downside. 

But to be honest, I actually feel for Heiney and think she should pursue legal recourse. If the college operated unethically, and the Dept of Education, requires that colleges do operate ethically, then I don’t know if the blame can necessarily be placed on her decision to enroll.

If she was deceived and lied to, how can I demand she pay back her loans. Lord knows if I was unknowingly ripped off, I’d like a chance to plead my case and get some type of relief.

BUT

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If she is successful in getting her student loans forgiven, then I would demand she forfeit any degree or credential she earned from her student-loan subsidized education.

I mean, her whole case is predicated on the fact that the school she attended sucked, wasn’t actually worth a single penny, and she feels her degree is useless.

Fine.

Give up the degree and I’m cool with you being able to explore student loan forgiveness.

Treat student loan forgiveness the same way that we treat foreclosures and bankruptcy.

I don’t get to revolt against my mortgage AND keep my house. No. The bank will kick my butt out, take back the house, and essentially forgive my loan (and damage my credit a good bit).

I don’t get to file bankruptcy, but keep my vacation properties, fishing boat, two dirtbikes, and $40,000 in personal savings. If I go to Bankruptcy court and convince the judge I can’t afford to pay back my creditors, the court takes whatever I do have, and distributes it amongst my creditors. My loan is forgiven, but I have to forfeit most of the things that debt allowed me to acquire.

So yes, even in Ms Heiney’s situation, as sad as it is. I will still be SOOOOOOOOOOOOOO pissed if her student loans are forgiven.

You can not have your cake and eat it too. 

Where do you see the student loan forgiveness issue going?

I think it’s inevitable and within 10 years student loan forgiveness will be a thing. And I’m sure it will be abused just like bankruptcy and foreclosure often are.

Heck, I’d take a damaged credit score for a couple years if it means I can swoop a free degree in the process.

*** keep in mind I graduated college with $28,000 of student loan debt, which was above the national average for my graduation year, so I’m intimately familiar with the “Frick, what did I do” feelings that come with a student loan obligation***

HELOC on hold. Refinance here I come.

refinance

Last Friday I shared my grandiose plans to take out a home equity line of credit (HELOC) in an attempt to diversify the liquidity available to me.

That HELOC stuff is soooooooooo 1995 last week.

I’m on to bigger and better things now. And by “bigger and better” I mean, it’s time for me to play the refinance game.

 

Some Background

We put in our offer on our house in June 2013. It was accepted the day Ben Bernanke spoke publicly, for the first time, about the reserves plan to slow down Quantitative Easing. Which, in turn, resulted in mortgage interest rates taking a dramatic turn for the more expensive.

May 2013 rates were around 3.5%. By June they had jumped half a percent to 4.07%. And by July 2013 (the month we closed on our home) they were at 4.37%.

We quite literally missed some of the best interest rates in history by 24 hours, locking in at 4.125% instead of 3.5%.

Rates hadn’t moved much over the course of 2014 so refinancing was never really an option, but after my post about taking out a HELOC, some of you suggested I look in to it.

 

So I did.

 

I called a handful of banks to get an idea of what rates they were offering on a 30-year fixed refinance. Most of the large institutions (Chase, Wells, Citibank, etc) came back with a rate somewhere around 3.85% and closing costs of about $4,000 to $6,000.

I then used Zillow’s handy dandy refinance calculator to see what the break-even was on that deal. Here’s the graph…

refinance

As you can see, I would save $44 per month by taking advantage of one of the big banks rates.

But that’s only half the story.

The break-even point was really what I was concerned with. Remember, I’d have to pay about $5,000 in closing costs to get that new rate. That makes saving $44 per month significantly less exciting. According to math, it would take me 9.5 years to earn that $5,000 back. I was hoping for a break-even somewhere around 2 years or less.

Bah humbug. 

Big banks were out of the question.

 

Next up, online lenders. 

After doing some research I stumbled upon, AmeriSave, a direct lender out of Atlanta.

For my situation (credit score, loan balance, etc) they offered the most competitive rate I could find. In fact, AmeriSave blew the big banks out of the water.

They were offering a rate of 3.75% and THEY would cover all of the closing costs. Ummm excuse me?

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Do you want to know what the break even is on the loan AmeriSave was offering? Check out the graph…

 

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That’s right. The break even point starts the day I get my new loan. I get to save $60 per month at no cost to me.

 

Is this too good to be true? 

Maybe. I read some online reviews. Some positive. Some negative.

Fortunately, Girl Ninja and I have excellent credit, all of our financials easily at hand (W2’s, pay stubs, account balances, etc), and a favorable debt to income ratio. I’m hopeful this will help our new loan close with few (if any) hiccups.

I spent quite a bit of time on Friday talking on the phone, and emailing, with my AmeriSave loan officer and so far everything has been running smooth.

side note: I may or may not have mentioned to him that I am a Personal Finance blogger who will be writing about my experience. Thinking that might scare him in to taking good care of me.

The only real risk for Girl Ninja and I is having the deal fall apart, but since we have no out-of-pocket expenses associated with the loan, if things go south we will just walk away and go find a new lender.

I’ve never gone through the refinance process before, but so far it’s been pretty painless.

Here’s to hoping it stays that way for the next 45 or so days.

Standby for more.

Mortgages and Medicine.

Unless you are the dumbest person in the world, you probably have realized I’m not the biggest fan of debt. I think it’s pretty stupid and unlike most PF bloggers, I don’t believe “good debt” exists.

Although I’m a pretty avid debt puncher, I do compromise on two issues…

Home

If you didn’t already know, houses are kind of expensive. The median home price in my zip code is $500,000. Even if Girl Ninja and I were able to stock away a whopping $50,000/yr in savings (which we aren’t), it would take us 10 years before we could pay cash for a house in our hood. And that’s assuming home prices don’t increase during those 10 years we save (which we know it will).

Last year we took on a $280,000 mortgage for our $350,000 home. That means we put 20% down, and financed the remaining 80%.

I would never try to call my mortgage debt “good”, perhaps “necessary evil” is a better descriptor.

Medical

This one goes without saying, and I assume most of you would agree.

If for some reason the crap hit the fan and I was faced with a decision between death or debt, I’m gonna take on some debt. That said, I am doing what I can to ensure I never have to be faced with that choice. I pay a pretty penny for health/dental/vision insurance each month, not to mention I have a decent chunk of change sitting in an emergency fund.

My insurance and savings should significantly diminish the chances of having unpaid medical bills , but on the rare chance I needed to buy an organ on Ebay, you better believe I’d do so. Side Note: How much you think a kidney goes for on the black market? $50K? $100K?

That pretty much wraps up my Tolerable Debt List. I realize my stance may be extreme for some, and for others it’s probably not strict enough. And this leads to today’s question….

Where do you draw the debt line?

What type of debt have you sworn off for good (credit cards, car, mortgage, payday loans)?

What type of debt are you comfortable with (mortgage, cars, 0% credit card offers, etc)?

At what point does debt go from being logical to being ridiculous?


How much credit card debt do you have?

Every now and again I like to pick your guys/gals brains. It’s not only helpful for me to see if I am at relatable to the people who read PDITF, but hopefully it’s also helpful for you to see where you stand against the masses. Since the value in today’s post is probably coming from the comments section, and not these words, I’ll cut right to the chase.

What is your total credit card debt? 

It’s really that simple. Apparently the average household (that has at least one credit card) has nearly $16,000 in CC debt. Let’s see if that rings true for this community.

I’ll get this party started. Our CC balance currently stands at $6,505, and like always, will be paid off at the end of the month. What’s depressing is that our most expensive purchase included in that balance was $140 for car insurance. That means we have a ton of freakin’ small purchases that amount to a rather large balance. Dang.

Your turn. What’s your balance (and why is it what it is)? 

extra credit questions: What is the interest rate on your card(s)?

Removing a credit card late fee was too easy

I received an email yesterday from Bank of America informing me I was charged a $25 late fee on my Alaska Airlines credit card for having a past due balance.

I pooped myself when I saw the email.

Literally.

Mostly because I was on the toilet when I was checking my email, but that’s beside the point.

I made an oath to myself a long time ago that if I ever incurred a late fee, penalty, or interest charge on any of my credit cards, I would immediately cancel them and limit myself to only using my debit card. Credit cards are awesome, but only when used responsibly. Fees and interest negate any benefit they may provide.

I pride myself on being responsible and always paying my bills on time. I knew I made a huge credit card payment recently so I had no clue why I was being charged a fee.

Turns out, I’m apparently a little too responsible. 

My credit card statement ends on the 2nd of each month. In May, I made a payment on the 2nd that I thought would cover my June bill. Submitting that payment a full 30 days earlier than I needed too.

Or so I thought.

I guess my payment, was a few hours too early and was applied to my previous bill, since the new statement had not finished processing. Basically, while I thought I was paying my June statement off early, Bank of America thought I was just submitting an extra payment for my May statement.

This resulted in an $89 balance due on June 1st that I didn’t know I had. I was charged a $25 late fee (that’s a 28% penalty) for not making that payment.

I had read blog posts before about people who have had success getting late fees or interest charges dropped from their credit card, but had no experience with it myself since I’ve never been late on anything. I decided to give Bank of America a call to see if I could persuade them to remove the fee.

Here is how that conversation played out…

BoA: Thanks for calling BoA, how can I help you today? 

Me: Um, I noticed I was charged a $25 late fee on my credit card balance this month. I’d like that removed. 

BoA: I’d be happy to look in to that for you, but first need you to verify your identity.

[we discuss my personal information to verify the account]

BoA: Okay, Mr Ninja. I’ve got your account pulled up here. I’ve just removed the fee. Is there anything else I can do? 

Me: Uhh, nope. Thanks. 

It was actually that painless. He didn’t ask me why I incurred the penalty. He didn’t ask me why I thought they should remove it. I didn’t have to threaten to cancel my card or take my business elsewhere.

I simply asked to have the fee removed and he did it. 

I always hear horror stories about credit card fees and late penalties, and I’m sure they are all justified, but so far my only experience with them was shockingly positive.

Have you ever incurred a fee that you tried to have removed or reduced? Were you successful in your endeavors? 

Patience Grasshopper.

I’m pretty impatient, this was especially true when it came time for me to work my way out from a $28,000 student loan bill. The only thing I wanted more than being debt free, was to be debt free NOW! My intense desire to get out of debt was the best and worst thing that ever happened to me.

Marathon not a sprint:

My minimum payment to Sallie Mae was $178/month. Do you know how frustrating it is to pay over double that, but barely see the principle drop? SUPER FRUSTRATING! The first $170 of my payment went straight to interest, I felt like I was barely making a dent. I felt defeated. I was giving Sallie Mae virtually all of my discretionary income and getting what appeared to be nothing in return.

As my intensity was decreasing and my frustration was increasing, I had an epiphany. I DIDN’T GET IN DEBT OVER NIGHT! No, it took four looooooong years to rack up that $28,000, so why was I expecting to get out of debt in a few months?

Renewed focus:

Right as I was about to crash and burn, this little epiphany completely reignited the fire in my heart. I was ready to kick Sallie Mae in the ovaries, repeatedly. I had a goal and it was simple, “Get out of debt faster than I got in debt.” This took the pressure off each individual payment, and gave me a long-term perspective. My frustration turned to focus.

Focus that I desperately needed.

You know the rest of the story. As my income grew, my $500/month payments turned to $1,000, $2,000, and at one point $10,000 payments. Watching my balance go from $28,000 to $27,000 was disheartening, but watching it go from $10,000 to $9,000 was FREAKIN’ AWESOME! Three years after graduating college, I reached my goal. I was debt free.

I hope this story encourages, but more importantly reminds you that the journey out of debt is a marathon and not a sprint. If you racked up $10,000 on credit cards over ten years, it’s probably going to take you a few years to pay them off. If you financed your undergrad and graduate education (7+ years of loans), you probably wont be getting out of debt in one or two years. Think macro not micro.

I think it would be really cool if YOU shared a little bit about your situation. How long did it take you to get in debt? How long did it take (or do you expect it to take) you to get out? When you feel defeated by your debt, how do you stay focused? Respond in the comments below and let’s encourage one another!!!!!