Good Debt, Bad Debt, No Debt

I actually made an argument for debt over the weekend.  And lost. 

Here's the background.  My son's girlfriend, Megan, is a college freshman studying to be a teacher.  She is doing the right thing attending a junior college and will then switch to a local state college after two years.  Two years at the junior college, two years at the state school, a teaching certificate and then making whatever a starting teacher makes these days which is not bad. 

The problem is limited financial aid like in zero.  Not exactly true as she has a scholarship that covers tuition but after that, zip. 

The good thing is that junior college is cheap compared to a state school and super cheap compared to a private school.  But still there are books, car insurance, lab fees,  and so on.

So if anyone qualified for student loans or aid, it would be Megan.  Went over this weekend to see Marc off as he is deploying to Guam for four months (18 hours flying in a plane where you can stand up in one place on the whole plane and your station is about the size of a refrigerator box--no thanks). 

Also heard about the Megan situation so did what I always do--jump in.  Look up the student loan office at the college, get a name, number and so on.  Go online and find the form for student loans and so on and so on.  Loaded for bear. 

So out to dinner with Marc, Megan, a few pilots and navs and another parent and then over to a pilot's house for a few hours of video games (which I don't get but they seemed to have fun).  Few words with Megan--got all this information, you certainly qualify, so on and so on.

Nothing.  No interest.  She had it all figured out.

Take six courses.  (I was already pretty impressed.  I never took six courses in one semester, one year I barely took six courses in the whole year.) And work 32 to 35 hours a week.  What?  That's nuts.  The French work only 35 hours a week by law and the vast majority of them do not go to school full time.  Most don't work either but that is another story. 

So two part time jobs and a full (actually more than full) student load.  Why?  Why not borrow a couple of grand, get a subsidized interest rate and sit back and relax?

At that point I was more schocked at myself than at Megan.  Here I was giving somebody an out for something she didn't want out of. 

Megan told me she gets bored if she is not working or going to school so the heavy load; school and work,  kept her active.

Plus she doesn't want any debt when she gets out of school.

Wow.  What a shock--somebody that wants to work hard, overly hard in my estimate, to reach a goal that much quicker without acquiring a bunch of financial baggage in the process.

Hats off to Megan.

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[Alex]

Great for the short-term, but bad for the long term. If you are responsible with money you can make more for the future by taking it all out (More so if you have SUBSIDIZE LOANS). When I was in college the interest rate was around 5-6%. If you see that that percentage is way, way lower than a credit card or any other loan than a mortgage. Also you get some tax benefits so that 5-6% is really 4-5% of interest. On Average the market makes 8% conservatively so while your in school you can use that to be put into a IRA. Given 30 years you have made more than you paid at school remember its all about the time value of your money so if you pay an extra 5,000 you can make an extra 100,000+ in the market. Think how banks make money they use Liabilities such as your money give you a little interest and turn around and loan that money out at 10x or more interest than what they are giving you in your checking account. If you’re a financial jelly fish this idea is a bad idea, but if your stable and understand to live way,way under your means you can get a head. That is why College loans and mortgages are considered investments.

[bluntmoney]

I don't think it sounds that nuts. 6 classes might be pushing it, but it would depend on what they were and how many projects are involved. I can understand the accomplishing more and keeping focused when you're busy part -- you just plain don't have TIME to waste, so you get things done.

[LivingAlmostLarge]

Awesome. Hope she can keep it up. I graduated in 3 year and DH in 4. But we were in sciences doing honors thesis and while I worked 3 part-time jobs, I also took out loans. Couldn't make ends meet and DH took a year off to work and earn more money during his degree.

But seriously 32 credits is crazy. I couldn't imagine carrying that many science classes at once.

[ispf]

[...] Good Debt, Bad Debt, No Debt at Ask Uncle Bill is an inspiring story about a college freshman studying to be a teacher. This is what I liked best about that post "Megan told me she gets bored if she is not working or going to school so the heavy load; school and work, kept her active. Plus she doesn't want any debt when she gets out of school." Wow! If only I had that attitude when I was younger, how much pain I could have saved myself from! [...]

[Super Saver]

Uncle Bill,

Thanks for the story. It's good to hear about students who are financially savvy about their college education. A good contrast to the USA Today series Young and In Debt.

I will highlight this article as my Carnival pick in my Tuesday posting.

[Super Saver]

Uncle Bill,

Thanks for the story. It's good to hear about students who are financially savvy about their college education. A good contrast to the USA today series Young and In Debt.

[Paul]

This is great! I did the same in college and got out with very little debt - worked like heck while going to school.

I'd like to instill the same to my kids, but my wife seems to think it's their right to get free college tuition from us :(

[Joshua]

Brand new to your blog, but had to comment that there are some of us college students who are bucking the trends and being smart with our lives.

For the first couple of years that I was in college, I took it easy and didn't work. (Putting myself through school at a private university...decent amount of scholarships though...) Results? $9,713.00 in student loans and a B average.

I got motivated in the middle of my junior year and had a total change in perspective (regarding debt). Decided that I didn't know where I was going or why I was in school, so I decided to take a semester off. I made a vow to myself...if/when I go back, I will pay cash for the rest of it.

I'm now in my last semester, and I've paid cash for my entire senior year. I work full-time (40 + hours a week) and take a full load (19 hours/6-7 classes) of senior-level classes, mostly major specific (International Business).

Most importantly, I'm saving like mad and am on track to meet my goal of writing a check for $9,713.00 on the day I graduate. I want, more than anything, to graduate debt free. Finally, the craziest thing? Since I started working full-time and going to school full-time, I've gotten straight A's--a 4.0 average. It's amazing what a little bit of motivation can do for you!!! Megan is absolutely on the right track!

[cahoots14]

I admire Megan...