How to manage student loans for college like a boss

Published November 11, 2015   Posted in How to Think

As much as I generally dislike the idea that college is a necessity for everybody, statistics overwhelmingly prove that those with college degrees not only earn significantly more money over a lifetime, but also enjoy lower unemployment and a more fulfilling work life.

Building on Stanford University in Palo Alto, CA

Building on Stanford University’s campus in Palo Alto, CA

College degrees are becoming more and more valuable, and college graduates earn an average of $17,500 more every year than the average high school graduate. In fact, they are also more likely to consider their work “a career”, which generally increases job satisfaction.

Pinterest: Manage student loans like a bossToday’s generation of young people are the most educated in history with more than a third holding at least a bachelor’s degree. This tells us that the value of a high school diploma is rapidly decreasing in favor of a 4-year degree. Most graduates consider their student loans worth the price due to higher earnings potential.

The data is very clear – those with a college degree have an easier shot at making good money and keeping their jobs, and high school diplomas are rapidly shrinking in value.

But holy shit, college isn’t cheap.  

In fact, the Class of 2015 is the most indebted group of students – ever.  On average, college graduates in 2015 are saddled with more than $35,000 in student loans. And, more students than ever are taking out student loans to earn their degrees. Nearly 75% of 4-year degree holders now have student loans to pay back.

So what gives? How can America’s college generation maximize their time earning a college degree, while at the same time minimize the impact of student debt?

Three keys to managing student debt

For many students, it’s nearly impossible to eliminate the need for student debt.  But, there are simple techniques to make sure that the debt incurred has as little of an impact as possible after graduation.

1. Think of college as the beginning of your career

Too many of our nation’s youngsters view college as their chance to go wild. Hell, this is our opportunity to move out of our parent’s house and begin to make some damn choices for ourselves, isn’t it? Yes…but also, no.

There is nothing wrong with having a little fun while in college. In a way, college is a reward for the responsibilities of being a kid and dealing with our parent’s shit for so many years. But remember, college is also the first step in determining our course in life, and this responsibility should not be taken lightly.

Instead of throwing caution to the wind and letting the chips fall as they may by worrying about the rest of your life later, consider college the beginning of the rest of your life. The earlier that we set ourselves up for success, the easier it will be to achieve our hopes and dreams.

Dude holding a giant paper

Click for larger version

But let’s be honest, shit is going to happen. I know that many of us will wind up getting totally blitzed at a wild rager at some point in college. It happens. No big deal. This is something that can be overcome…generally.

What’s tougher to overcome? A hospital visit or jail cell. Drug use. Running off with that smokin’-hot chick you met at Jeremy’s house party last night.

Just…don’t be stupid. I found myself mumbling “Don’t be an idiot, Steve” a lot in college.

Basically: Have fun, but stay focused; unlike Las Vegas, things that happen in college may not stay in college – and mistakes made here can very much effect the rest of your life.

2. Choose a degree with reasonable earnings potential

Admittedly, there is a very fine line between choosing a degree that you will thoroughly enjoy and choosing one with a nice salary potential. Clearly, choosing a degree program based solely on post-college earnings is ripe for failure. None of us want to spend four years in a program that we hate, much less work many years at a job that we don’t enjoy.

However, finding a high paying job after college enables us to pay back those loans as quickly as possible, which in turn frees us from retirement-killing debts that keep us working for years longer than necessary.

Think about a few things before you declare your major:

  • First, think hard about your future and what makes you happy.
  • Second, how do you want to draw your paycheck after college? Self-employment? Working for an established company? Peddling money on street corners?
  • Third, what degree program will best prepare you to achieve your dream?

There is wisdom in designing our college program around our future. For example, taking a look at companies and reading through job requirements in our chosen industry may reveal appropriate degree programs for us. Observing industry trends is another good technique.

Dollar bills

Money isn’t everything, but consider your industry’s potential before choosing a major

Understand that not all degree programs are created equal, and your earning potential may suffer because of it. For example, Forbes published an article back in 2012 with the 10 worst college majors. Topping the list is anthropology and archeology with an unemployment rate of greater than 10% and relatively low yearly salaries.

Other underperforming majors? Art degrees (like liberal arts, fine arts, film, video and photographic arts, etc), Philosophy and Religious Studies, Music, History and Literature.

Basically, some of the “softer” majors – possibly due to their low barrier of entry and rather undefined career prospects. If you take out student loans to earn a degree in an area of study with higher unemployment and lower salaries, you might find yourself struggling to manage your student debt.

What are the 10 best degrees? Forbes says Finance, Accounting, Computer Science, Mechanical Engineering and other related business and technical fields.

While it’s true that we aren’t all entrepreneurs or scientists, understanding market demands can make our career prospects much more bright and our student loans quickly a thing of the past.

3. Select a state university over a more expensive “prestigious” school

Although there are exceptions, racking up more debt to attend a so-called prestigious university may not be worth the cost of admission. Though highly-publicized national rankings attempt to set some schools above others, state schools generally provide perfectly good educational opportunities for the great majority of us, setting us up to be just as successful as those who paid more for their “designer diplomas“.

In fact, research suggests that “an elite education is likely to leave half to two thirds of graduates demoralized and broke”, according to these researchers. Part of this is due to a reduced likelihood of success at schools with higher academic standards and a more gifted student body. In other words, the more strenuous the environment, the more difficult it will be to academically succeed.

There are exceptions, but I would argue that a quick scan of college costs vs. 30-year salary is a fairly hollow and much too simplistic metric.

Remember, most companies simply want their job prospects to have a degree that relates in some way to the job. In my experience as a hiring manager within a variety of organizations, we routinely hired candidates with degrees from virtually any university. In fact, I cannot recall a single instance where the university made any sort of difference in our decision to make job offers.

What did make a difference? Side projects during school and any extra curricular activities, which demonstrates a motivation to get involved and go above and beyond. We cared much more about experience and achievements during college than the name of the university.

My advice: Save your money and excel at your less expensive state school, because a properly-motivated student at virtually any university can (and generally will) be successful in life.

What else?

Working during college can dramatically reduce the need for financial aid and may also provide a little bit extra for savings – not to mention a potential job after college.

Several other techniques can help minimize your debt after college, like only taking out the bare minimum of what you need to get through school. Also, there are a wide variety of college scholarships available that can help pay for college; some even foot the entire bill!

Other techniques include living at home to avoid expenses. When that isn’t possible, finding an apartment with a roommate might make the most financial sense or, of course, a dorm room on campus (I lived in a dorm room for my first year of college).

Consider attending a community college for the first two years and then transfer into a 4-year university. Community college credits very often transfer to state schools and offer students a less expensive way to get required classes out of the way. Community colleges also tend to offer more night classes to help those who work full time while going to school.

What other tips or techniques do you have to keep student loans low during college?

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Comments

26 responses to “How to manage student loans for college like a boss”

  1. Your point about choosing a degree with a reasonable earnings potential is well taken. In retrospect, I am not sure that majoring in English (this is 15 years ago now) was the ideal choice for me. I was interested in a lot of things — math and science among them — and chose English partly by default, and partly because there was a lot of advice floating around in the early 2000s about the value of a solid humanities/liberal arts education. Unfortunately, I definitely never gave much thought to how exactly I would use this degree to develop a career, and I had no understanding whatsoever of how much money one might expect to make in Field X vs. Field Y. Today I sometimes joke that college majors should be listed in the college handbook with average salaries next to them — that would have helped me out a lot! 🙂

    • Steve says:

      Thanks for the comment, Sarah – average salaries next to majors…that’s an awesome idea! I think you’re right, that would probably help steer kids in a better direction if they are unsure about the direction to take. Of course, we don’t want a bunch of kids majoring in the highest average salary major even if they have no interest in the topic. Flunking out of school isn’t great for your earnings potential, either. 🙂

  2. Oh man… Had my share of idiotic moments in college! 😉 Great advice on thinking of it as the start of your career. I get sad thinking about so many stidents today not getting the “full college experience” of attending full time and living on campus, because it can be such a formative experience that makes you more independent and self-reliant. But I’m not sure that it’s worth going into mega debt to get that experience! Re: field of study, I majored in English, and have never regretted that, or had my earnings held back by it, but I also hustled hard at extracurriculars and internships. So I totally agree with you that that stuff matters a lot!

    • Steve says:

      It’s interesting that “side hustles”, essentially, are just as important in college as they are later in life. Especially internships, which can provide valuable work experience that can be used after graduation to get your first job. Excellent point!

  3. Working in college was the best decision I ever made (second to working throughout high school). It gives you something more authentic to put on a resume, especially if you find a way to work in your field. More than that, though, it teaches you perspective and helps you develop grit.

    As for that photo post that went viral, I admire that girl’s gusto and determination – but I also think that literacy (financial and otherwise) and perhaps privilege play more of a factor than anyone likes to think. I’m a first generation college grad and sometimes you don’t know what you don’t know, especially if you don’t have anyone who kind of paved the way a bit. And but, I was also privileged enough to have a family who valued education (even if they hadn’t achieved it themselves). That makes a huge difference, IMHO.

    • Steve says:

      Thanks for the comment, Penny! Yup, working through school can make a huge difference, not only to your ability to pay for school but also in your prospects for work after you’re done. Networking, baby!

      Like you, I also had a family that valued education – at least my immediate family. Not going to college really wasn’t even a part of the discussion. We used the word “when”, not the word “if”. 🙂

  4. I went to a state school, had a little scholarship, and graduated in three years. I still came away with approximately $35k in student loans, and add another $10k for grad school. I would of definitely hit the scholarship path harder, and maybe would have helped pay my school bills when they came due instead of taking loans. That money would of been better put to use there, then trading stocks in my dorm room with my earnings from part-time work. 🙂

  5. Ha ha! I got a BA and then an MA in anthropology. I was doing the whole “find a job you love and you will never work a day in your life” thing. I did have a lot of good times but in the end I went on to something that pays better.

    • Steve says:

      Hehe, small world! Good for you for finding something that you still enjoy but can make more money at. I know your future self will thank you for making that decision! 🙂

  6. Maggie says:

    This is a great post. Education inflation is a real thing. Now that so many people have college degrees, that’s the new high school diploma. As an arts graduate, I have to argue against not graduating in the arts. The key is to not WORK in the arts. 🙂 I graduated with a master’s degree in the arts and leveraged that degree into a job in behavioral economics. Lots of companies are interested in working with people with arts backgrounds because of their creative thinking, broad knowledge base, and ability to adapt. I’m not saying all arts graduates end up with that, but it’s possible to leverage an arts degree into a money-making job. (Though the chances of making real money in the arts is still slim.)

    • Steve says:

      Thanks Maggie! “Education inflation”, I like that term! Upgrading your education to have that prestigious name on your resume.

      I can definitely see where companies link an arts degree to more creative “out of the box” thinking. Good point. Major in the arts, but don’t actually work in the arts. Point well taken! 🙂

  7. Ah, this is beautiful. This is the main reason why I am ahead in life compared to counterparts that make more money than me. I graduated debt free and finished a four year degree in two years. I hate school personally and just wanted to be done, plus my first career paid horribly the first few years and I wanted to get those years over with and treated those two post years from college like my masters degree. I also lived at home which isn’t cool and rode my bike to school. I also worked full time during those two years. I worked at 6am to 2pm and then went to class 3pm to 9pm. I also went spring and summer so I went to school year round. It was a hard two years but finishing four in two and graduating debt free set me so far ahead it was worth more than picking up an MBA. College is supposed to make us rich and now it is a huge factor in keeping people from reaching millionaire status because of student loans. As a boss I have never looked at where someone went to school. I just care if they can do the job…and sometimes that comes down to street smarts over books smarts to make the sell. Nice article.

    • Steve says:

      Thanks for your comment, Lance. Like you, I didn’t like school. I mean, I really, really didn’t like school. Most of what I have done throughout my entire professional life has been 100% self-taught. I viewed my education as much a means to get my foot in the door, but nothing else.

      Sounds like you definitely busted ass getting your degree out of the way. Good on you! Nothing wrong with putting in a little sweet equity into your education so you can kick start the accumulation phase of your life as early as possible. Looks like you did it right.

  8. Mr. Groovy says:

    Hey, Steve. Another great post. When I went to college in the early 80s, a credit was less than $40. Taking 5 or 6 years to graduate or getting a phoney-baloney degree back then wasn’t particularly damaging to your financial prospects. Today? It’s a totally different ballgame. If you consume higher education frivolously, you will find yourself with ruinous debt and crummy employment opportunities. To paraphrase Dean Wormer: “Indebted, unskilled, and living in your parents’ basement is no way to go through life.” Any high school senior who plans to go to college would be wise to heed your advice.

    • Steve says:

      Thanks Mr. Groovy, appreciate your thoughts.

      “If you consume higher education frivolously, you will find yourself with ruinous debt and crummy employment opportunities.” Love that quote. Well said indeed!

  9. Consider college as the beginning of your career is the best college advice I’ve ever heard (seriously, you killed it!) I do think that more and more high schoolers are starting to adopt that attitude, which is awesome. But it needs to be a widespread mantra to be honest.

    As someone with a BA in English, I’ve got to give a little push back to the “choose a well-paying major” advice 😉 haha. I think the key to excelling with in a Humanities career is knowing what you want to do with your degree and pursuing it relentlessly. From my experience, it’s all about how you leverage your experience, internships and career ambitions. But if any future college students are reading this, there is definitely hope for you if you choose a “poor paying” career 🙂 I’m not making as much as my best friend who works as an engineer for Tesla, but I’m making more than enough to live well and there is a lot of room for salary/job growth in my field (social media management and online content creation). Great post as always, Steve!

    • Steve says:

      Thanks Taylor, appreciate your support and feedback. You are absolutely right that there is a fine line between choosing a degree that truly interests you, and choosing one where the likelihood of paying back your student loans might be a little easier. I can definitely get behind pursuing your line of work relentlessly, especially during the accumulation phase of your life. That way, you get to work in a field that you truly enjoy, and you’re maximizing your earnings potential while doing so.

      It’s a win-win! 🙂

  10. From my experience, having two academic advisors highly involved in my education was the reason I didn’t graduate with 2x the debt I have–one academic advisor helped me with a plan to graduate early while the other helped me secure internships, scholarships and grants. Advisors are paid to advocate for students–take advantage of the opportunity. 🙂

    • Steve says:

      Ah, good point Claudia. Graduating early (like another commenter said as well) is definitely another avenue to take to minimize student loans and quicken the start of your money-making career. I’m sure academic advisors aren’t all created equal, but I definitely agree that taking advantage of their presence at school is a very, very worth while endeavor.

      Appreciate your thoughts. 🙂

  11. Mr. SSC says:

    I’ve got to say that having parental guidance and input into how you view college is a huge boost. Remember that, all you parents out there. My parents told me “You have to go to college!” But there was no guidance on how to deal with school loans, (it’s good debt, don’t worry about it) what to focus my major on or anything. I spent the first 2 years undeclared and blew a lot of “free money” learning some great thinking skills and questioning everything, but nothing great for a career. After paying for a year out of pocket I realized I was wasting money. I went hiking for 4 months and figured out if I wanted to be in school or not. I did, but I realized when I did grad school that I wanted to get a school that I could say, I graduated from “blah” and people would recognize it. Undergrad, it doesn’t necessarily matter, in my opinion and my field. Grad school seems more critical.
    While I came out of school $64k in debt with student loans (poor, poor decision making) it worked out, and those debts have been paid off. I also went into a high paying field though…
    While my specific journey to a successful career isn’t one I’d recommend to anyone, parts of it I’d recommend to everyone. Specifically, finding out if you want to go to college, and if the answer is yes, WHY? What do you want out of it? If you can’t answer that, don’t go to college yet. If you don’t want to do college, then what do you want to do that you won’t need a degree for? There are plenty of great jobs that don’t need a degree and pay well, but they’re more “trades” oriented. Looking back, I’d be perfectly happy working construction, digging with a trackhoe, making less than half my pay that I am now.
    It just took me a while to figure out that more money isn’t the end game.

    • Steve says:

      Well said, Mr. SSC – parenting is a huge influence. Of course, that probably depends a little bit on those parents actually going to college, but even if they didn’t, guidance based on life experiences is definitely warranted in this case!

      Thanks for your comment, as always. 🙂

  12. Jaime says:

    I live in Omaha, Ne and a lot of job ads here are wanting a college degree (associates is OK but Bachelor’s is preferred but they at least want an associate’s degree) for basic jobs such as retail.

    I really wanted to go to Westmont which is a private, 4 year Christian liberal arts college in Santa Barbara, Ca but it was expensive and my parents couldn’t really afford it. I decided to go to a state university in Nebraska instead and I worked for a couple of years before I went.

    I’m not going to have any student loans when I graduate. I have savings from jobs I had before I went to college, free government grants and my parents pitched in the rest. I also live off-campus because it’s cheaper.

    I did choose a B major because I wanted to learn business skills. I think they will serve me well whether I work for a company or for myself. I really rambled, didn’t I? =)

    • Steve says:

      Hey Jaime! Looks like you did it exactly right! And having some cash in your pocket after you’re done with college will definitely give you a leg up. It’s tough to be graduating debt free. 🙂

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