Student Loans For College: An Inevitability For All But A Lucky Few

Wren Building College Of William & MaryAt 55 years old, Dr. Lin has been practicing dentistry for close to 30 years.  He grew up in Oakland and attended UC Berkeley for undergrad thanks to his stellar academic record.  When he graduated, Dr. Lin’s parents gave him three choices of what to do with his life: 1) Dentist, 2) Doctor, or 3) Lawyer.  Not very pleased with his limited choices, Dr. Lin choice the “easiest” of the three and became a Dentist by going to UCSF.

I first met Dr. Lin at an SF Giant’s baseball game our respective private bankers invited us to.  Despite the 20 year age gap, we connected immediately through a common interest in the stock markets.  Dr. Lin kept on telling me to buy dividend stocks such as BP and Coco Cola because they were “risk-free” investments with a guaranteed dividend return.  It’s how his mother got rich, and it’s how he is getting rich now.  Given any investment enough time, and chances are, things will turn out alright.

When I asked Dr. Lin about why he invested so much of his net worth in dividend stocks, he responded, “I’ve got two college age sons, and they are expensive!


Dr. Lin told me that if he did not become a dentist, medical doctor, or lawyer, his parents would have disowned him and made him pay back all of his undergraduate tuition.  He didn’t want to be as strict on his sons as his parents were on him so once again, he rebelled by letting them do whatever they want.

Son #1 is currently a junior at the University of the Pacific, a $50,000 a year private school with campuses in Sacramento, San Francisco, and Stockton.  UOP isn’t exactly a prestigious school.  In fact, I’m guessing only a minority of you have heard of it.  Lucky for son #1, Dr. Lin is paying for all four years, equal to roughly $350,000 in gross income.

Son #2 isn’t as bright, or as painful on the pocketbook with his decision to go to San Jose State.  When Dr. Lin heard of his decision to attend SJS he jumped for joy and offered to buy son #2 any car he wanted for under $25,000!  You see, SJS only costs $16,000 a year, including room and board.  Dr. Lin finds it amazing that UOP is 3X the price of SJS, with no guarantee of a better job upon graduation.

Can you imagine spending $66,000 a year for education for two sons?  It’s no wonder why student loans for college students have grown so tremendously over the years.  If the median household income in America is $50,000, how on earth does a typical US household afford college tuition?  It’s either get a scholarship, go to community college or go to a four-year public institution and commute from home.


I was shocked to hear how expensive education had become.  When I was going to college in the 1990’s, private school costs ranged from $20,000-$30,000 all-in.  With private school costs now 100% higher, and incomes not keeping pace, something has to give.

I told Dr. Lin jokingly, “I’m just going to count on my kids being smart and getting full scholarships!

Don’t count on it Sam!  Everybody’s parents think their kids will be smart.  The reality is, only a few of us parents will be so lucky!  My kids are lazy!  They study for three hours and go vegitate in front of the TV or the computer, playing stupid games and messaging their friends on Facebook.  When I was growing up, it was 5 hours a night minimum!

I wanted to ask Dr. Lin, Well whose fault is that?  But, decided against it.  Instead of counting on my kids to be smart, I’ll just count on them to be dumbasses then.  That’s probably the more conservative way to go anyway.

Dr. Lin then sprung another surprise on me.  “Sam, my son just got into UOP’s pharmacy school.  I’m very proud of him, but that’s another $75,000 a year for three years after undergrad!

Holy crap, I thought to myself.  “Does your son realize how much you are forking over for him to get an education?  Hopefully he will pay you back?

He knows, but I don’t know.  I told him I’d pay for his undergraduate education, and maybe we can work out a deal where he pays me partially back after getting his pharmacy degree.“, responded Dr. Lin.  “Now you know why I need some juicy 5% yielding dividend socks!  Don’t fail me now BP!


A large part of me believes parents who can afford to pay outrageous tuition costs should pay for their kid’s tuition costs.  After all, any logical parent nowadays considers the cost of raising their kids as part of having kids…….. right?  RIGHT?!  If not, please don’t have kids, especially if you can’t even take care of yourself.  $1,000 in government tax credit is not enough to cover the cost of raising a child a year.

The only caveat I have for paying for your kid’s tuition is that they fully understand how lucky they are and how much in gross income one needs to make in order to pay for such tuition.  If our children don’t appreciate the financial sacrifices parents make, then they won’t appreciate their education.  If they don’t appreciate their education, they’ll end up taking basket weaving for $50,000 a year and returning back to live at home with the parents!

If parents can’t pay for their tuition, and if it’s a choice between getting a solid education with the potential to make a good living vs. always making minimum wage, then student loans are an inevitability.  Borrowing $20,000 a year is a lot, but perhaps not so much if you find a job upon graduation that pays $65,000 a year and $100,000 a year five years out.

Working part-time to pay for tuition is not a bad strategy, particularly if the part-time work doesn’t take too much time away from studying and developing relationships with students and professors.  There’s something to be said about having skin in the game.  Suddenly, sleeping in class doesn’t seem right if you’ve got to work 10 hours waitressing to pay for its cost!  This is why it’s important that everybody pay some amount of federal income taxes for the good of the country.


When I graduated from high school, I had a choice between a $30,000 a year private school and a $10,000 a year public school.  I chose the $10,000 a year public school because tuition was only $3,500 a year and I knew I wanted to pay my parents back eventually.  I’m glad I went to public school because I was able to get the job that I wanted out of college at a reasonable price.

When I got my MBA, I took out $18,500 a year for three years in Federal Student Aide even though my company was paying for 85% of the tuition.  I’m a finance geek and decided to take out the loan to pay off the tuition as I went, and use the company tuition reimbursement after each year to invest conservatively.  In the end, it worked out fine because my consolidated student loan interest rate at the time was only 2.5% and my returns averaged about 6%.  I let the student loan linger for several years until I finally paid it off given it started becoming an annoyance.

I’m one of the lucky ones thanks to my parents and the availability of cheap financial aide from the government while having a decent paying job.  If you plan to take out student loans, please consider the following:

* What is the expected income of the job you plan to get after college?

* What is the current state of the economy and where do you see the economy upon graduation?

* What is your expected student loan payment 6 months after graduation?

* How long will your student loan payment be and when do you conservatively estimate you will be able to pay it back?

* Are you going to school for the right reasons?  What do you really want?

* In a worst case scenario, do you have parents or a generous aunt to bail you out?

* Do know that if you file for bankruptcy, your student loans cannot be wiped clean.

I believe a good education is crucial to getting ahead.  However, one must carefully weigh the costs to the benefits.  At some point, costs may become too great, and you will end up in a negative cycle that’s hard to overcome.

Refinance Your Student Loan With SoFi

SoFi is a fantastic social lending company that provides rates as low as 1.9% variable with auto pay and 3.5% fixed with auto pay. The reason why they can offer lower rates than the rest is because they analyze you based on merit, quality of employment, and education besides just a credit score and financials. There is zero origination and prepayment fees. Offer terms are from 5, 10, 15, 20 years in both fixed and variable. Both private and public student loans can be refinanced.

Besides low rates, one of their best features is their unemployment benefits. If you lose your job while repaying your loans, you don’t have to pay your loan for up to 12 months while you look for a new job! Interest will still accrue, but having this cash flow break is a huge benefit. They also provide job assistance guidance as well.

You can apply to refinance or apply for a new student loan here.

Photo: The Wren Building.  Oldest academic building in the country. Updated for 2016 and beyond.






Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. says

    Personally I think parents should give their kids the money they saved for an education and if the kids get scholarships they get to keep the money. How else do they have incentive to choose the cheapest yet best school and get those scholarships? If they want to use the money to start a business rather than go to school, maybe that would be a better option. If you are worried about your kids blowing the money you have bigger problems than paying for school.

    • says

      my entire college cost ~10k. this was 1996. I did bust my buttand finish in 2 years total

      i did not live on campus and did missed so much of thecollege experience. i did not miss the college debt experience though.

      there are ways to cut the college costs.

      i think the costs are way out of line now a days. there hasto be a better way. cant believe the internet isnt addressing a more costeffective way to teach.


  2. James says

    I too am lucky. I went to school in Florida and qualified for 75% state scholarship based on grades/SAT scores (e.g. did your parents pay for an SAT prep class?). I graduated in 2009 and it took my 5 years to do so (mechanical engineering). I’v since learned that this doesn’t really cover much of the cost per credit anymore due to “tuition differential fees” that started the year after I left.

    I had zero luck with other scholarships – a no hitter, the bad kind. I applied to as many as possible, had a terrible return on time investment.

    My parents also did “Florida pre-paid” – basically, pay now and lock in a tuition rate. At least, that’s how it worked when they started. Between pre-paid and 75% scholarship, I usually got a check back from the school which I used for living expenses. My very last semester, I owed some $ because the engineering program is more than 120 credit hours and I took a couple extra courses that have been extremely high value to me now that I’m working.

    I moved to San Francisco shortly after graduation to found a company with some friends I met while interning. We’ve been going for a few years now. Not for an instant do I doubt how lucky I was during my collegiate experience.

    Cost versus benefit is eventually going to reach a tipping point (if it hasn’t already). It’s awesome for the lenders that they have minimal exposure to that risk considering loans can not be discharged…

    • says

      I like this “Floriday pre-paid” idea! I hope more states have this program as it seems inevitable that tuition prices are going to continue to skyrocket!

      In fact, I might even be willing to pre pay now, without kids…..

      How’s the start-up thing going? How is it funded, if at all, and how do you guys eat? Love start up stories!

      • James says

        As tuition skyrockets, a pre-paid program might not be sustainable. At least until some sort of balance is found.

        Start up, it’s been going for about 3 years now. Product has launched in a few countries (mostly in Africa, soon N. America). We were initially boot strapping ourselves, some of my coworkers were on unemployment at the time (having been laid of due to 2008). After 6 months or so, we secured our initial round of funding from a super angel. Now that we have product, we’ve got a couple more investors behind us and some convertible debt. Depending on sales, we could be financially sustainable within the next year – we could also be out of business (always an possibility with startups). Exciting!

        We eat by running the company lean. By lean, I mean a few very dedicated people that are paid fairly well. For a long time, we had a tiny office with cheap rent. “Ultimate salad club” a few times a week too. One person makes lunch for everyone on a rotating schedule. Food is cheaper in bulk.

  3. Katie says

    I have nothing worthwhile to add to the discussion, but I just wanted to stop in and say thank you for using a photo of the Wren Building. Go Tribe!

  4. A says

    That’s William and Mary! Did you google “great AND greatest AND colleges” or just “2012 Best Value Colleges Top 10 Public Schools”* to land on us?

    For what it’s worth: My family didn’t contribute a cent to my college education, and while I made a few stumbles (I graduated W&M undergrad with no debt but a few ten thousand in debt from graduate school) I deeply appreciate that they didn’t. I agree wholeheartedly that the cost of higher ed is outrageous and blown out of proportion, but wouldn’t go back and change how I paid for school. I would have gone back and paid more attention to tuition costs while applying, but still would have chosen my alma mater.

    * 2012 Princeton Review List:

  5. says

    I literally laughed out loud (which I don’t often do when reading) when I read this sentence: “I’ll just count on them to be dumbasses then.” College is definitely highly debated for good reason. It has the ability to drain our wallets like no other! I don’t quite know where I land yet, but I do think that some form of education is valuable. Heck, I got a crap degree in Audio from an Art School, but am now a tax professional and A/V engineer. The engineer part came from experience and promotions, but the tax part came from studying my butt off (online) and passing the IRS exams to become an Enrolled Agent. Took me a year! With the largest database of knowledge known to man at our fingertips, 24/7, there’s no excuse for not educating yourself. And most of us can do it for free. It does become a problem when looking for a job, though, as most employers won’t hire the “self-learned” guy over the “I have more degrees than fahrenheit” guy.

  6. Robert @ The College Investor says

    Ugh…I can’t stand student loans but they are useful for some things. I think the government subsidiary on the student loan market makes things worse by covering up the true costs of lending in this market. I also think that students should be required to sign a Truth in Lending document that discloses the costs, as well as making it clear that this is a loan against future earnings.

  7. says

    My parents paid half for mine and my scholarships and summer work money covered the other half. I was 3rd in my high school class and ended up being Valedictorian of the College of Business at my school and I still didn’t have a full ride scholarship. It was a public school though so it was much more affordable.

  8. says

    The price of an education is quite ridiculous.I’m not sure if States such as Ga still grant free education to those attending UGa but that would be a huge reason to move there. I’m also not sure why the cost of education paces at double inflation. All I do know is that I would have tried harder had I funded my own college. Technically I did through small loans and big scholarships but loans don’t feel real until you repay them. I think less and less people will pay for their kids college.

  9. says

    I’m not sure I would pay for 100% of my kids tuition if that time comes. I’d want them to take some responsibility and ownership in their education. I think having their skin in the game in that way will make them less likely to slack off or try to stay in school and be a 7 year senior or something like that.

  10. Leah says

    My grandparents put away some money for me in a college fund, but I didn’t end up using all of it, luckily!

    It is true that in Georgia, if you had a 3.0 GPA in high school you could get the HOPE scholarship which would pay for all four years of tuition at a public university like GA Tech or UGA. They’re making it MUCH more difficult to get nowadays with the state budget cuts, etc. but it’s still a well-funded program.

    With the help of a part-time job and the college fund to cover books and living expenses (yay for $300 rent and an appetite for Ramen!), I graduated debt free!

    • Leah says


      P.S. to keep HOPE you had to maintain a 3.0 GPA in college, so there were *some* extra stipulations to an otherwise cakewalk scholarship.

    • says

      I heard about Georgia’s program! That’s great if the HOPE scholarship is true! I’d consider moving there right away if I had a couple college bound kids b/c UG and GT are great schools.

      Is the hurdle really just 3.0 in HS and maintenance in college and not a 3.5? 3.0 seems pretty easy no?

  11. says

    I’ll be following my parents lead…

    They covered room and board, I had to pay for the actual school fees and books.

    That way if I screwed around in college, it was my money being wasted.

    I think there needs to be a shared responsibility, otherwise it creates the “handout” mindset IMHO.

  12. says

    These questions are exactly why there really needs to be a financial planning/career goal-oriented class in high school. I think more students would make logical decisions and plans; choose the less expensive school, get serious about selecting a major, and limit the student loan pain. Even if parents are footing the bill, maybe a class like this would help alleviate some of the burden on the parents.

    I was lucky. I went to a state school and my parents paid the tuition. However, when I went back for my credential, I paid for it myself through student loans. I didn’t want to burden my aging parents and I’m an adult. Had I been counseled early on with career planning, I think I would have just gotten my credential to begin with. Nothing like waiting 15 years later. ;)

  13. says

    My parents paid for most of my college and I’m really thankful. I have been sending them money every year since I graduated. I would love to pay 100% for my kid’s education, but we’ll see how it goes. If it will cost $100,000/year, then he’ll have to get some kind of loan…
    It’s too bad college cost so much these days and still going up. It depends on what he wants to study. Maybe he can go to college in other countries depending on the subject.

  14. says

    My parents paid for my entire education through college. My children had the same benefit of private school and college. My son paid for law school. Education was important to me and I wanted to give my kids the best education possible. I think this is more important than some inheritance.

  15. says

    I am with you, Sam. I would want my son to be an entrepreneur not a wage slave. Is college education necessary? Absolutely YES! Is an expensive college education necessary? Absolutely NO! I believe that your college diploma takes you to the door, what you do afterward is up to your talent, not to your diploma. (By the way, I have a BS & MS degrees, so does my wife.)

  16. says

    Our daughter just graduated from college. She got a large academic scholarship, took out a small loan, and the rest was paid for. Since we only have one child, and she’s a great young adult, we are pleased to help her out. We planned early and set up a 529 when she was a baby.

  17. says

    I was fortunate enough that my parents could pay for my very pricey prestigious college, but I didn’t realize how fortunate I was when I was in college. It’s only now that am in the real world, working myself that I can fully wrap my brain around just how much it cost for them to send four children to prestigious universities. I don’t plan on having four children, just one or two, but I do very much hope I will be able to pay for their educations. If I can’t, I will strongly encourage them to choose a college where my savings will cover tuition or they can get a scholarship. I don’t want my children to start their adult lives in mountains of debt. When I was in high school I thought going to a prestigious university was of the utmost importance, but I realize now I could have gotten the same education at a less expensive college.

    • says

      Wow… four children to private uni…. is it safe to say your parents are rich if they paid for all four?

      I have a feeling that well-heeled parents don’t care much about the money so long as their kids are doing well and are happy. What is it you are doing with your “price prestigious college” diploma now?


  18. says

    My mom always told us, “one college degree and one wedding,” and we still had to take out the minimums (ending up with $15K of federal student loans after we graduated). Parents paid the difference, but I think having us take out these minimums, my mom got our skin in the game. I have no idea how I’ll do it.

  19. says

    Banking on a scholarship, even after you have it, isn’t always a great idea. I’m living proof that you can be awarded tens of thousands in scholarships only to receive roughly 30% of what you expected to receive through no fault of your own.

    Shit happens. Plan accordingly.

  20. says

    I’ve heard of UoP. We competed against them in Forensics. Sadly, I remember the students as being jerks.
    C and I are currently contemplating a 529/ the WA GET plan for our child now. I need to find out if we can start one before we actually have a child.
    Personally, I think it’s ridiculous that we expect 18 year olds to be able to make decisions about what they are going to do for the rest of their lives. We all appear to want them to get into a good school, get into a BS program, and graduate in 4 years while working at least part time, and preferably, there will be a cum laude after their name.
    I honestly believe it is an unrealistic education, and would be perfectly happy if my kid wanted to take a year or two off from school, or only go part time at the beginning and work some, to figure out what they want to do.
    I graduated high school with a 3.97GPA (25th in my class). I had a full ride academic scholarship to our state school. (At the time this was $10,000 total for 4 years. By the time i graduated, that wasn’t full ride anymore.) I was an honors student who had 12 credits from AP tests before I even started school. And I knew exactly what I wanted to do.
    And you know what- I lost my scholarship after 2 years, because college was too much fun. I then had to pay for myself. It had never been the paln for my parents to pay for college. It took me six years to graduate because I realized that I was wrong about what I wanted to do. My last semester, I actually had a teacher write on a review that he wished he would have offered that class before my last semester, when D really was for “diploma”. I graduated undergrad with a 2.83.
    6 years later, I was back in school for my MBA. I went to school full time and worked full time and graduated with a 3.79 because I finally knew what I wanted to do and why I wanted to do it.

    Having skin in the game didn’t make me a better student. It didn’t make me more inclined to get a “useful” degree (my BA is in history with a minor in writing from a school known for it’s mining/engineering degrees). Because I was a kid. At 24, when I graduated, I still didn’t know what I wanted to do, I just knew I was ready to be done.

    We’ve sold our society on the idea that going to college is what you do after high school. I believe strongly in getting a college education, but it is one of those things I really think might be wasted on the young. Seeing C and his classmates (he’s on a campus that is probably 90% non-traditional students) go through school, it’s a very different experience from what I had. They are all learning and are excited and passionate about what they are doing, because they all know not just what they want to do, but why, and why it matters.
    And that makes so much more difference than money, even your own.

    • says

      Thanks for your perspective.

      May I ask why you decided to go from a 3.9 GPA all the way down to a 2.8 and lose the 4-year scholarship?

      You write that college was “too fun”. Is there more to that?

      What if your parents forced you to make the $10,000 before college, would you have not let the GPA drop so much?

      My parents basically told me if I don’t do well in college, I’ll be fucked.

      • says

        It wasn’t so much a decision as a growing pain- an expensive one at that. Forget what they say about highschool- my first couple of years in college were the most freedom least responsibility point in my life. Teachers didn’t take attendance, I didn’t have to catch a ride into school with my parents. Sometimes I went to class, sometimes not. School had been easy in high school and I assumed it would be in college. I didn’t do the required reading or study for tests (I’d never had to before).
        Instead of going to class, I played cribbage, hearts, spite & malice, magic and other card games with friends. We hung out in the student union and talked. I had an absolutely great time doing everything but my classwork.
        I was a kid. I’d never learned study skills because I’d have had to before. (And if I’d gone to class every day, I probably would have been fine in college, too.) It culture shock in many ways. In others, it was my rebellion.

        My parents were never going to pay for college. Not for my brother, not for me. So I always knew it was up to me to figure out how to pay for it. As long as I maintained honors student status and didn’t want to drive, my mom figured school was my job. I realize I didn’t receive paychecks, but I did, in fact, work for that scholarship.
        I had a job (on campus), lived in an apartment across the street from campus, and paid all of my own bills except my groceries- my mom still covered that. (This was quite a bit less expensive than living in the dorms because of the forced meal plans.)

        My parents raised my brother and I expecting us to go to college. My brother left school one class short of his degree to join the military. I took 6 years (two of those only going to school part time while I worked full time) to get my BA.
        But my father had no degree and did quite well in government service based on his military degree. My mother had an AA (in library science, I think) and but worked in jobs that didn’t require one.
        They both made a decent living. So there was an assumption that my brother and I would go to college, but we also both believed we could do will without our degrees. (And my brother did do quite well, based on his military training, before he became an entrepeneur and is still doing nicely.)

        I was in college because that is what was expected of me, because it didn’t occur to me there were other options. I didn’t really know what I wanted to do, I only thought I did. I do not regret any part of my college experience, not even my student loans (which I am still paying on). But I do honestly believe that we should not expect our high school seniors to go right into college. For some, that’s the right choice. For others it’s not, even if college will eventually be the right path.
        Sometimes, we need to grow up before we can appreciate an education and the benefits that will bring us.

        • says

          Sounds like a good case for the Gap Yea / Walk About our Aussie friends do after high school. A chance to mature and find onself.

          I had no idea there were other choices beyond college either. I’m glad I didn’t because the temptation might have been too great.

  21. Michael says

    Fortunately, my parents paid for almost half of my college tuition (’94-’98). The other half came from a 50% scholarship, $9,000 per year, and I added another $2,000 a year from savings. I also worked during the summer so that I would have some spending money throughout the year.

    Looking back, the $40,000 my parents contributed to my college education was big chunk of change. Clearly they wanted me and my siblings to get a good education. Now that I am older, I understand the value of a college education, but that value is not infinite.

    IMO, a $200,000 investment towards college education seems excessive, even for upper middle class family, and especially if the child has no skin in the game, though I’m not necessarily comfortable with them taking a loan at such a young age either. Certainly, this should be a family decision – one that should be given a large amount of thought – for all involved (not just the parents).

  22. Anonymous Student says

    You make a couple of good points. Being the child of two parents who fully pay for my tuition, I will say the following things.

    I’m attending an Ivy league school. Tuition/room and board is roughly 59K this year. I’m lucky that my parents were willing to pay all of it, but they had some conditions.

    I wanted to study economics and finance in hopes of getting a high finance job on the street. My parents are highly risk averse people, and this wasn’t nearly enough. In their view, the only degree that guarantees a job right of college was engineering. So they required me to apply to a program where you graduate with both an engineering and an economics degree in four years. The program is notorious for being an insane amount of work, and I can firmly say I barely partied at all my first year of college. The librarians even learned my name. That was the price I had to pay though if I wanted my parents to pay for it – they said I could study whatever I wanted so long as I financed my own degree. But I wanted to be debt free (legally, not from my parents) when I graduated.

    I’ll also say this. Both my parents high incomes (engineers the both of them) more or less disqualified me from obtaining any sort of scholarship. This is because even merit scholarships take into account some financial factors. The only scholarship I qualified was a measly $2500 from the National Merit Scholarship Corporation, since I was a National Merit Finalist and this a PURELY merit based award. So in that sense, I couldn’t really finance my own education through scholarships. Going to a state school wasn’t an option either for me, because as you are well aware, high finance companies only recruit from high caliber institutions – nearly all of which are private schools.

  23. Raj says

    I graduated in 2009 with a degree in English. I had plans on becoming an English teacher and had about 16,000 in student loans so nothing too bad (my parents weren’t able to help me financially at all and I worked full-time through all but one semester of college). I moved to China to teach since teaching jobs in the US were difficult to find at the time.

    I (stupidly) decided to get an online degree in English Literature (a reputable school and a pretty good education, but definitely not worth the high cost). I recently graduated and my total student loans are now 61,000.

    I’ve worked my way up to the director of foreign staff in an education company here with a very high salary when compared to similar jobs in the US vs. cost of living here. It was the stupidest decision I ever made to get my MA because it has ended up being a vanity degree that will likely never pay off too well in the long run though I could like get a job teaching in the US if I ever return. I start loan repayments this month and I am able to pay considerably more than the minimum on them. The debt just bothers the hell out of me because it’s going to take years to pay it off and given the precarious nature of living in a foreign country like China as well as the intense competition in the language education sector here, I’m not guaranteed, nor do I expect, to hold this position for more than a couple years and I’ll be left at square one so to speak. I guess it’s the time to learn to embrace the precariousness of human existence.

    Anyway, I’ve read quite a few of your articles and this one prompted me to comment.

    College age kids are not necessarily dumbasses but we are so little acquainted with the realities of life after college (I was myself) and with what we want to do with our lives that I personally think it might be best to delay college for a couple years at least so that they can get a taste of “real” life outside the shelter of parents’ homes and school. I’m nearly 28 now and I still have no idea what I want to do as a career. I think many people, at least those I know, are in this same boat; they don’t know what they want and it may take them a decade or more to wheedle it out of themselves.

    Another big problem I have noticed lies in the fact that I and all my former classmates were told that student loans are “good” debt and that it will pay off in the end. I just don’t see the payoff when the worry just gnaws away at you constantly even when you are able to make more than the minimum payments.

    If I were ever to have children I would pay for university (public school only or the equivalent of public school tuition if they chose a private school) for them and I would make sure before having them that I would be in a financial position to pay for their education.

  24. arb says

    Hi Sam,
    Just found your site in the last few days, love it. Wish I had found it several years ago. Seems like we share some similar background/interests…I’m a pretty good tennis player, grad school in VA, love Personal Capital for simplifying my life.

    I’ve got a question for you. I’m 32, just got married and my wife has ~130K in student loans (med school). She is a FM physician making ~180K. I’m a resident making 60K, so total 240K. We have a mortgage with 3.25% interest rate and 200K loan. She just got a car, ~1K/month payment for a 30k loan at 2%, She is maxing 401k, and I am maxing a 401b with post tax money planning to convert to Roth when I finish residency. In 2 years, our total income will probably increase by about 250k. I have about 300k in post tax investment account (inheritance, yes we are very lucky) and 70K in a roth

    What are your thoughts on how fast we should be paying off the student loans? The loan is in Canada and is at prime, currently 3%, but variable. I’ve suggested to my wife that we set a goal of paying off the student in the next 2-3 years, meaning ~5K a month to loan. She suggested that we just go on the 10 year repayment plan.

    I know that the interest rate is low at 3%, but it is variable. And while yes we could get a better return in the market, theres no guarantee. I say that paying the loan is a guaranteed 3% “return.”

    • says

      Welcome to my site mate.

      Congrats on both becoming doctors and earning a lifetime of six figure incomes!

      The student loan is one of those things where it’s a personal choice. I paid of my MBA loan of around $40,000 within 5 years because it got annoying, even though the rates was only around 3% as well.

      You guys should manage your liquidity situation and pay down the loan as you go. Start with 2-3K a month, see how you feel, and then slowly ratchet upwards. Your income potential is large, so correlate it with your growth. Then again, you already have 300K after tax in an investment account, so I don’t see why paying down 5K a month is a big deal at all, unless you are saving for real estate.



  25. $iddhartha says

    I consolidated my undergrad loans at 4.5% and my professional loans were fixed at 6.8%

    Here’s the catch, by default, you pay these off proportionally over a period of 10 years. However, the savvy individual can elect to take the maximum payment term thereby acquiring the lowest minimum monthly payment possible. With the gained cash flow you now apply any extra payments solely to your higher interest loan. (This isn’t as straightforward as you think so check with your lender or whatever institution ended up with your loan.) By doing so, the average grad like me will easily save thousands in interest.

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