Inflation is Making You Pay More on Your Debt - (W4:D4) Debt Free Millionaire Podcast

Debt-Free Millionaire

Simplified Explanation: How easy is it to stay out of debt? That depends on you. Will you borrow from another credit card, after you just paid it off? Statistics show that the more effort someone puts into something they really want, the more likely it will be permanent. If your parents paid off your debt, you would be right back into debt within months, or years. If you did the work, and felt the pain that came from it, then you will appreciate it more.

Real Life: There is an old saying: “Cash is King” well what about debt? Previously, I mentioned how debt is bondage. Another saying is that “you become a slave to the lender.” This is not just hyperbole; this is completely true. When you live your life with high debt, it controls you. It keeps you working for it, until you rise up and say, “no more,” and start taking back control of your life, by getting rid of it. Debt is one of the greatest burdens and sources of stress that will ever enter your life. Some would say, even more than medical issues. More people die from financial stress (including medical issues caused by stress, starvation, and suicide) than any other single source of death. It is like a ball and chain around your leg, and should be seen for what it is.

BUT, you have a way out. You are learning about it early on, so you can avoid the pitfalls caused by this burden. Here are some of the most “acceptable” debts in life, that most people undertake because of necessity. These debts are College, Home, and Transportation.

NEW DEBT (COLLEGE YEARS) (W4:D4)

College – The greatest way out of financial strife is education. Statistically, you will make more during your life by going to college or trade school, because you will be able to get a better job (though, is it worth how much you pay to go to college?). Here are the statistics for how much you’ll earn, compared to the cost of college.

Level of Education

Average Annual Income

Difference in pay over 20 years

Public College Debt
(on campus)

Private College
Debt
(on campus)

Less than HS diploma

$25,636

-

$0

(Minimum) HS diploma

$35,256

$0

$0

Some College

$38,376

$62,400 ($3,120)

$16,000

$34,000

Associate’s Degree

$41,496

$124,800 ($6,240)

$32,074

$69,112

Bachelor’s Degree

$59,124

$477,360 ($23,868)

$103,456

$215,796

Master’s Degree

$69,732

$689,520 ($34,476)

$288,000

$369,600

Professional Degree

$89,960

$1,094,080 ($54,704)

$435,200

$652,800

The big question is, is your higher degree worth the amount of money you will have to spend (tuition, living expenses, and interest on your loan)? Let’s look at the final part of that equation.

Cost of college after interest (over 20 years) - If you put all these expenses in a student loan (say $100,000), at the average interest rate (5.8%), and pay the minimum over 20 years, as is most student loans, you will end up paying an extra $69,185.83 more on your loan. The chart below shows the breakdown for each of these.

Level of Education

Public College

Difference in pay over 20 years

Public College
Cost
(w/ interest)

Private College
Cost
(w/ interest)

Less than HS diploma

$25,636

-

$0

(Minimum) HS diploma

$35,256

$0

$0

Some College

$38,376

$62,400

$27,070

$57,523

Associate’s Degree

$41,496

$124,800

$54,265

$116,928

Bachelor’s Degree

$59,124

$477,360

$175,033

$365,097

Master’s Degree

$69,732

$689,520

$487,255

$625,311

Professional Degree

$89,960

$1,094,080

$736,297

$1,104,445

As you can see, if you paid for these degrees through only student loans, and then paid minimum payments for the entire 20 years after college, college is definitely not worth the money you are paying for it, especially if you go to a private school. That is why there are grants and scholarships. But just as you should be intentional in the way you spend money, you must be intentional and work towards what you want regarding education, as well.
To learn more, you need to read Debt-Free Millionaire – Free College. To give you a taste, here are some of the chapters to save money on your higher education.

Search out each of these on our website www.debt-free-millionaire.com/freecollege/(16)

#1 – Hands Down – Get a Job while attending school

The best way to pay for college, and not be burdened with debt, is to save money before attending college. If you are too close, work while attending. According to FLSA (Fair Labor Standards Act), you can begin working at 14 years old (with limitations to the number of hours worked as a minor, under the age of 16).

Note: _____________________________________________
Save Money in a 529 account – The Federal Government has a program you can find at your bank, called a 529 Savings Accounts. All money deposited is tax free. You and your parents can add to it.

Note: _____________________________________________
Dual Enrollment – This is when you enroll in both high school and college, at the same time. You can attend college while in your high school and claim college credits at a discounted rate, while living at home. This is a great way to shorten the amount of time you’re in school, since you are attending both at the same time.

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Test Out of Some Classes – If you’re thinking ahead, and you learn/know a subject well enough, you could take a test to skip these classes in college. This could also include AP tests in high school.

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State Grants – Your state wants you to go to college before working, because they know you will be paid more, and then they can reap more income tax after you attend school; but you will need to prove yourself by graduating from a college, university, or trade school.

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FAFSA Student Aid – If you are an independent and your parents don’t file you as their dependent on their income tax, there is financial assistance for you. There are consequences to not being a dependent, though, such as you can’t use their health insurance.

Note: _____________________________________________
Federal Grants – The U.S. Government also wants the increased income tax, and so will invest in you. These are typically small amounts, but remember the analogy of the small streams of revenue into a raging river of success.

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College Grants – Colleges want to entice you to attend, because they know the more students they have, the more revenue they make. Remember also, they are not paying money for you, as much as reducing their rates of money asked from you.

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Ask the college for money – Even if the college does not have grants available, when you find the college you want to attend, meet with their financial counselor and ask for money. They have small amounts to give.

Note: _____________________________________________
Work Study Jobs – Federal Work-Study is part-time work for undergraduate and graduate students with financial need, earning money to pay their education expenses through community volunteering services.

Note: _____________________________________________
Private Scholarships – There are for-profit and not-for-profit companies that have scholarships all around the world, based on different themes and requirements. These are paid straight to you direclty or the schools.

Note: _____________________________________________
Claim a Tax Credit – There is a $2,500 tax credit that you can receive in a tax return every year, for going to school. You or your parents may claim this benefit, depending on if you file your own taxes, or your parents claim you as a Dependent.

Note: _____________________________________________
Community College – If you can’t afford the college of choice, you can always attend a community college, and put the money you saved toward your graduate work, later, at the University of your choice.

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Cut down on expenses while at school – Use a strict budget while attending school. Only buy what you need, and save money that way. Living off campus is much cheaper, and gives you more flexibility.

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Invest in your schooling – While attending school, make investments that pay you during this time. Some ideas include, buy a house and rent it out, or find an apartment and sublease it to friends and classmates.

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Tuition Reimbursement – Work for a good company who has a program to pay your school fees. Work with them for the initial number of years, and then agree to work for a set additional time after graduation. Win-win.

Note: _____________________________________________
Student Research Assistant/Work for the College – If you work for the college or university, they may offer a reimbursement for your tuition, while you are in your position, and you gain work valuable experience.

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Work Colleges – There are institutions set up so you can earn money by working for the institute while they teach you, like in a normal school setting. They will pay for your schooling, and some living expenses.

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Colleges with free tuition – There are 18 colleges in the United States that are tuition free. Some of these colleges only pay for classes - not room, board, and supplies, but that dramatically reduces the cost.(17)

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Sublease your Space – Have you ever desired to do something in real estate? Well, this little hack may make you money while attending college. Rent a house with quite a few rooms, and rent out each room to 1-2 reliable tenants. Let them pay your bills. Make sure you have their parents co-sign on the lease, though, and also be sure your Lease Agreement doesn’t prohibit subleasing.

Note: _____________________________________________

Asking for gifts – When it’s your birthday, ask for college money or savings bonds, to save for your college. Almost anyone is willing to spend more on a gift if it goes towards college, than if it was a normal gift.

Note: _____________________________________________

Now that you have a list of options, which ones would you like to use (while you are going to school, just before enrollment, while transitioning, during college, and working between semesters)? List the ones you choose to follow, and then meet with your parents, or in class, to discuss these options. Together you can help each other with the best options. There may be some options not listed here, as well, so bring your ideas.