MMS034 – Paying Off Your Student Loans To Live Debt Free

welcome to the money mastermind show let’s talk money and welcome to the money mastermind show tonight we are talking about paying off student debt loans and joining us is Xena KU mock of debt free after three calm um hi Xena are you doing hey guys thanks for having me thanks for being here and of course we have the rest of the money mastermind show we have Kyle privo of young a thrifty CA miranda marquit of planting money seeds peter anderson of bible money matters tom drake of the canadian finance blog and i’m glen craig free from brooke so before we start I want to direct you to our event page on this should be a Q&A tab there so if you have any questions regarding student debt loans that you want to ask feel free to enter him in there we be loved we’d love to take a stab at them so student let the debt loans they are becoming more and more of a necessary evil and at the same time student tuition rates are just rising astronomically um it’s out of control how do we how do we work to pay those off um so Xena I think you have a little bit of a background with paying off student debt loans once you tell us a little bit about your story yeah so i graduated college in 2011 and i had about twenty eight thousand dollars with student loans which was average at the time i think it’s a little bit higher now about 29,000 and I wasn’t really i think is worried as I should have been i bought my loans um when I was in school everything I read said okay you should have about the same out in bones that you’ll make in your first year and I was a journalist a major so I was gonna rake in the big books um so I wasn’t worried none of my friend like we would talk about how we had loans but no one seemed worried um and it was almost like a badge of honor like I friends who didn’t have loans and I was like oh must be nice um so when I graduated it kind of hit me because I had never had credit card debt never had a car payment and I didn’t know what it was like to owe money and um it it really felt like an anchor and it felt like I couldn’t do a lot of things I wanted to do like if I wanted to go travel um you know it was like law I have all these student loans and my first payment was about twenty percent of my take-home pay which was huge for someone like starting out like Jannetty savings and living alone and you know kind of expensive so it was it just felt like reality just like hit me in the face like okay hi college is over like now it’s time to pay these back now let me ask you you said that based yourself and your friends it was pretty much understood that what you were what you had out loans was pretty much expected like what you should have had out right I’m aware to win that idea come from you know I think well enough the funny part is i went to school out of state and most of my friends were in state and they still had student loans and so that was almost the crazy part to me was that you know for me was like why i have to take it once because going to school out of state even at a public school is still expensive um but even for all of them being in state um you know when getting scholarship like they also had loans and I friends who took out the same out that I had if they didn’t qualify for anything else so I don’t it was just everyone had them and it just I think when everyone around he’s doing with the same thing it just becomes the new normal and no one ever says if that’s good or bad if it’s everyone’s doing it like it must be okay sort of like a keeping up with the Joneses sorts okay you know I have to win it if it’s something sorry I just I’ll shoot at this and then let you talk um if it’s similar to when you’re buying a house you know when everybody says no no it’s okay if you you borrow up to this amount that’s kind of expected that’s fine then you borrow that amount and go wait a second i don’t know if i could pay this back you know it’s like you’re expected to hit this average for your your student debt and then it’s like wait a minute know the average isn’t necessarily so good to be paying off and i didn’t know anyone who had like a crazy man a student loan I don’t think I knew anyone had like 50 grand and ones are 100 grand in loans um so it kind of felt normal to be like 20 30 thousand and debt like that felt manageable and I think we were like well we’re we owe the average amount so we should be fine and yeah I don’t think anyone ever wondered like okay what is

your salary look like after college like what will that loan payment look like after college like no one ever thought about what you know what’s I don’t know I think we just felt like it would all work out in the end right and you don’t think that that 20 30 k could be so crippling when you’re on your own afterwards okay I think or the part of the thing is that the cost of college has been rising so fast since 1983 the costs for students to attend colleges risen at the pace of almost five times the rate of inflation and you know I think a lot of students to start thinking about you know how much money that really is the project on student debt says that fifteen percent of ours for student loans are defaulting within three years of NRI repayment and at for-profit colleges the rate is twenty-two percent so I think a lot of people are just entering into this whole thing without their eyes wide open and they kind of just say yeah I need to take these loans I’ll take those and they don’t think about other options as far as maybe doing some work study and not taking as many loans or working while they’re going to school or maybe going to an in-state school keeping the cost lower so well and that was the thing like I for my loans like I never got like a check in the mail or anything i think it just went straight to tuition but I have friends who like they would I get money in the mail and I think they would pay their tuition but they still had like enough to that they could live on and I think that allowed people to be a little more reckless and I don’t a reckless cuz you know if you’re using to pay rent in groceries that’s fine but I think if you’re not forced to be creative and have fewer resources and you’re not going to come up with like solutions to you know maybe instead of going out why don’t we all you know out wine at home or why don’t we try not eating out as much I mean we I had the worst habits at college like I think i was eating out like every other day and I mean I was not budgeting at all and I look back and think how much money I wasted that I could have saved and either pretoria moment sir just had a nice little emergency fund when I graduated yeah it’s it’s almost like having a credit card but you don’t actually get the card cuz you know that they tell you how much of a loan you can get okay and you know your tuition may only be this much but they’ll give you this much and alone like they’ll actually give it to you and just write you a check for the difference that you get to use for whatever you need to use that you’re supposed to be using it for school for tuition I’m not tuition but room and board books and other things to get by but really wants that money is in your pocket it’s it’s good for anything at that point um and it’s yes that’s what I did with my student loan money it’s a sad thing that’s kind of kind of what it would happen cuz that you know I went to school back in the day when they you could pretty much I mean you could pretty much just they were just giving giving it out practically I mean you whatever you ask for and you get enough to cover your your room and board and your tuition and I had a scholarship and they didn’t really take that into account and ice so I had this full tuition scholarship and then but they still gave me the full loan amount and so I mean it was it was really like it was it was the beginning of every semester was oh my gosh I’m rich well of course is it hey that’s not really but you know I that’s what that’s what you think of when you’re that young right your frontal lobe isn’t developed and you don’t make good decisions and so that’s part of the problem too as you’ve got these you know we’re with these kids and I sound like I’m old but you have these kids & Loubs not developed till you’re like 24 25 and you’re not making the decisions and you’re just confronted with this money and you’re like yeah that’s money that I can spend that’s that’s my money it’s not your money it’s somebody else’s money you have to pay it back but you don’t think like that see so I think that’s part of the problem is just this idea you have your fresh out of your home you’re making decisions on your own and then you’re confronted with this like huge chunk of money and what do you do well you’re 19 you go to Vegas that’s what you do I was much more responsible with mine I stereo not only I not had debt before her credit at the time but I don’t think i even had much of a real job before that either so this is really the first money I was seeing and yeah after tuition and textbooks it was car stereos that’s action but you know at least you can use that every day you know that’s true okay you can buy trip to Vegas every day drive my car to

school so it was kind of connected yeah if you look at the average student and what they’re actually spending money on though you know it’s it’s pretty clear to me that there there’s a lot of spending there that doesn’t really need to be happening you know there’s room and board was twenty-six percent for the average student nineteen percent on tuition and fees various other things made up about fifteen percent and then the rest of it forty percent was on discretionary items entertainment apparel services travel vacation things like that so beer beer yeah that’s probably 20 hours left on ramen noodle soup well well it’s sort of an interesting phenomenon it’s it’s kind of like when people max out their credit cards people say oh I’m spending my student my student loan money because I can’t make do with any less and then of course they run out and then they still manage to live for three months or two months of the semester just fine so that’s sort of a self-defeating premise there and that you have actually proven that you could live just fine on on that budget maybe it wasn’t a comfortable existence but you know like you say Xena there’s there’s alternative ways to have fun and stuff I think there’s the weird culture on student debt and NZ talked about it briefly where we look at it as we call it good debt you’ll see all the personal finance websites mortgage debt and student debt those are good debt and since 2008 now just student debt mortgage debt is no longer good Idol especially if it’s rolled up in packages of securities and derivatives but we won’t get that on so now it’s just tuned debts dudettes an investment in your future but if you use that language then you must admit it’s a relatively terrible investment in most cases especially for very expensive private schools in the USA specifically and if we keep this culture up of like yeah it’s good borrow money it’s a good investment at what point will that sort of five times inflation rate come down I don’t think it will the market will continue to soak that up universities will continue to find creative ways to take your money and build brand new buildings that don’t really need to be built well that’s what when I was in high school I’m riot a professor at a couple I didn’t have professors in high school I had teachers and um let’s not disparage high school teachers wear one no they were great and they would always tell me like oh like when I was in school I worked summers and I worked every semester and I paid for all my tuition by myself and I don’t know how you could do that right now I’m that’s me oh you knew they were old actually oh yeah I mean they’re right there wasn’t a whole lot to teach back then so sorry they would share these stories and I would say oh like wow like yeah give us really old um and I think back now and it’s just like I don’t know how you could do that and I think because it does feel so depressing if you really think about it and there’s no education around well it’s like I don’t remember signing up to get my loans I really i’m not sure how it happened and my parents were really great about holds no finance they taught me like all this stuff and even they never sat down and said okay you’re going to be a journalist so you’re going to make three grand a year maybe this is what that looks like this is what your loan payment would look like and I just never worried like no one ever thought to check that so I know when I thought just like what if you don’t get a job what if you get a job in a really expensive part of the country like no one I there’s just no education around it and I know that no you’re 18 your sister be on your own public no one is that responsible i don’t care who you are so that that’s something that really has to change like someone has to teach you what it means like before you sign for that loan which i still don’t remember doing didn’t someone should write a book about that maybe somebody who’s would be in the school system just a thought um your loans you know with a private loans / they federally funded no I had a Stafford unsubsidized loans okay so that’s a little different from let’s say a private loan where they can really kind of charge charge the sky and set their own terms to a degree yeah and that was one thing that um it was definitely my arms got nothing um that was definitely something that when I talked to friends from a private Wallace it’s like oh I need to stop complaining right now um but yeah so look I have friends who have had to do like deferment or forbearance um and I think those are really great options I’ve ever done anything like that but that’s one thing I’m grateful for that I never signed up for any private loans cuz or a

variable interest rate moment or anything like that so it was pretty lucky in that regard I can say that for the stafford loan there at least recently there’s something where you have to go through pages and pages of quote-unquote education more like gobbledygook um and make sure you understand it and sort of electronically sign that you know what you’re getting into but I’m willing to bet that most people just zip right through and get to the last page you know it’s not like you’re sitting through a class and you really have to learn this stuff probably most people couldn’t recall what it is that they just read well the scariest thing for me was I took a personal finance class in college because I’m so cool and I keep telling yourself yeah I took one too yes the crazies parted not oh it was so fun it was really easy class um but uh it was offered through the business school and it was a really good business goal and but I didn’t count toward credit for any of the business majors so no one who was actually business major took it because it wouldn’t help them get their degree and I had a friend who was in the business school when I asked him for help like what I think is a chapter on mortgage amortization he was like I don’t know how to do that I thought oh like you’re majoring in accounting and you don’t know what a pending amortization schedule is and holy we’re on trouble like this country is in trouble and I thought if you’re not teaching business kids this and their shirts while not teaching us liberal arts students this who is learning it yeah it looks means a lot actually a lot of adults you know who’ve been working for a while and being on their own for a while I have trouble with their finances I mean let’s face it that’s kind of why we’re here helping people out so to expect people who earn their teens to be able to budget money that’s just kind of thrown into their pockets you know maybe I best you’ve worked a week and got in a paycheck and now you’re having maybe thousands of dollars show up that’s a lot to ask a young adult I think but let’s go back just to reiterate that there are different types of student loans so um the private ones they tend to have much higher interest rates and they’re not easy to get rid of you know those are ones that can really really hurt you not that the federally funded ones the Stafford’s are great because their interest rates have have inched up as well but um at least from everywhere I see you want to try to avoid those private ones and those are sorry I don’t think I know I don’t think I know any it hasn’t but I had a few blog readers sick Oh have I private loans and they’re just killing me i also have my federal ones and um i think it’s i die and that’s another thing i no one really realizes the diff when you sign up like I think you just kind of think alone as a moan and even with federal loans like there are so many different ones you could get that is yeah it’s just it’s so complicated it’s so complicated now I mean I think we’ve talked a lot about you know how stifling a loan can be but maybe let’s just backtrack and just talk a little bit about why it’s a good idea to pay them off early and what are your benefits by really putting extra into it maybe not just not paying off what you’re supposed to pay but paying more to it to get rid of it for me it was um it was really just a psychological effect of it um like I said I really felt like it was tying me down and the main reason I wanted to pay them off super early I pay them off in three years graduation is that my boyfriend I were pretty serious at the time and I thought well we get married in the next few years like heat that’s gonna be his debt whether or not he signed you up for it like that will be his and that we coming out of art you know joint account and he didn’t have any student moments or any debt so I thought I don’t wanna I don’t want to put that on him and I just want to see it was almost like an internal challenge like let’s just see how quickly I can do this and I feel like a lot of people in there you know early 20s graduating from college they put off a lot of things they put off saving and creating emergency fund and starting the 401k and paying off their loans and I think that feels like very you know adult stuff and it’s it is really hard to figure out if you’ve never done it and your parents never taught you so I think it’s like oh you know when I’m 30 I’ll I’ll think about that like I’ll think about that later and I figure you know the older I get the more expenses I’ll have at some point I’ll probably own a house and there’s always a reason not to do something and I thought well when I’m 22

I can get away with living like poor person and so I might as well do it when I’m 22 and no one thinks it’s weird that I shop at Goodwill so 930 Oh might see it as a hindrance no I probably still be doing that so how Macklemore Genoa there no it’s all good I’d consider a relative I’ve got relatives of their 50s making six figures still shopping at Goodwill but you can find good stuff there yeah we have a very high hand Goodwill store in our neighborhood years but there was a stigma and some arrows to it too um is how were you able to make that a priority and get the funds together to pay off so much of your loans in three years um honestly i think i just realized that how little time he needed and you know after paying for the basic necessities and still trying to save some money just for an emergency fund I kind of her eyes like oh well you know I don’t need as many new clothes as I used to buy and I don’t need to go out for dinner as much as I used to and you know I honestly a lot of it was just starting to read a lot of blogs um get rich slowly obviously was a really big one for me just finding really cheap recipes to make um just you know at some point I was like requesting my free samples of shampoo every day so when I have to buy dollars which is a probably little insane but um I think you have to be insane if you try to do something I pay off your loans in three years while I’m all making 30 grand well maybe maybe the other way to look at it though is maybe it’s just insane to take out so many loans not that you know I’m putting anything on your shoulders it’s obviously what we all do it’s the culture um but you know to pay it off maybe that’s the the same thing to do yeah it’s it’s hard cuz I think I don’t know anyone else um like personally not online who’s tried to do what I’ve done so i always look like the outsider um when people are like oh why are you going to lunch with us i’m like well you know okay can’t put ten dollars toward eating out and then you just look like a total Scrooge and a cheapskate so but on another hand now when you get your paycheck you have that much more of a buffer zone because you don’t have to worry about the payment oh yeah now I’m like I mean now Mike hey like let’s go out so it’s way more embarrassing to have your sixty thousand dollar BMW hauled away when you’re 40 cuz all your loans have finally been collected I would guess it’s never happened to me but I would assume that would be blue burst and skipping out of ten dollar lunch no it’s amazing what people will take personally and what people shame you with um I did have someone ask when I turned down an offer to go out to lunch if I ever have fun and um I mean you can tell him I fun person um so it was like yeah I have fun like but I mean eating out with your pastas like not that fun guys so I’m just kidding if he’s watching hello if the boss is so much fun how come he’s not flipping the bill um but yeah so I I did have a few people being like oh like why weren’t you doing the header like if I said I wasn’t buying something or doing something or complaining about the cost or something like I think it does look a little suspicious so but I yeah people like to throw the the cheap thing around you know but uh without knowing the full story and understanding and what you’re trying to do I’ve certainly seen now or you know there’s times I was trying to pay off my credit card and be like no I can’t go out this night or I can’t do this particular thing and they’re like AHA but it’s only this much money that’s like it’s only this much money now but if I do this for this much money and that for that much money that for that much money it starts to all I’d up and then it’s a whole lot of money that I don’t have um so any other ways that maybe we could try to make it a priority or how to make it so that uh we’re putting money towards our student debt I think what a lot of people do is they try to say well if there’s money at the end of the month then I’ll put that toward my loans or I’ll save that um I know you hear this a lot of time it’s like pay yourself first but it really is like you know if I I figured out okay if I went to PLO and self in this amount of time then this is how much I have to put toward them and that first year I really didn’t have like too much leeway in my budget so i just decided well you know i’m not going to get a second job because it wouldn’t really work with my schedule and I’ve made all the cuts to

my budget that I really can so any extra money i have like i’ll just put it toward violence so if i freelanced a month then i would went put that toward my loans birthday money Christmas money um you know a lot of times I would open up like different bank accounts offer signup bonuses if you like do direct deposit and I got very friendly with our HR person because every two weeks I would like come up to her with like a different direct deposit form because it’d be like 100 bucks every time that first year I think I earned like a thousand bucks which was a lot of money for basically you know not a lot of work um so little things like that like I think it’s just figuring out okay what am I willing to do to pay this off what am I not willing to do I know some people will get a second job or you know though get roommates or something like that so I think you just kind of have to realize that if you want to do something hard you’re gonna have to give up a lot of things and but that’s your choice like for me like I wanted to pay off my loan it’s like no one was forcing me it’s not like they were due in three years so it was like well what can I you know that’s my priority then something else has to has to fall so I was really looking at your whole lifestyle and figuring out what really was important for you and for you it was getting rid of that loan so you were able to to cut away a lot of stuff to get to that point mmhmm yeah I think it really is it is personal for a lot of people with their with their loans you know some people are okay with if they have a low-interest phone of just floating that loan keeping the paying of minimum payments for me personally I hated having student loan did I just I wanted to get rid of it as fast as I could so you know my wife didn’t had to have any student loan debt one when we got married so she was help but she had a job at the time she was helping me to pay off my loan as well and we just put as a line item in our budget we instead of just paying the minimum like we had to we would you know double up the payment and have that be part of our budget send that in every every time and then if we got extra amounts of money from a tax refund or a little extra money from some freelance work or whatever he would just take that and put it right towards it and we didn’t pay our arse off or mine off in three years I like seeing it did but but it you knows five years after I graduated that we had our all the loans paid off so it really is about whether that’s a priority for you mm-hmm and I it’s funny you mentioned the tax refund i know this time around um this time a year I’m hearing it a lot you know p up saying oh well you know i want to buy this and oh I’ve got that text money coming in and if I had to list my financial pet peeves I think it would be people using their refunds for something fun and I’m not saying you can’t do that but like to me it’s like a like if you’re getting a big refund if you’re probably doing something wrong um and which is a whole other topic but I i think it’s like you said Peter um if you have a plan for it you know if my grandma gave me two hundred dollars and I didn’t know I was coming I already had a plan for it I knew that you know if she ever gives me any money that’s going to promote so when she gave it to me you know i just go to the bank cash it make an extra paying for my loans so i think if you get it you start wondering what can i do with it then you start thinking of some things you can do instead of maybe what you really want to use it for make a plan for your money or it’s gonna disappear yeah i think a little bit of that is a little bit of entitlement on in that you get done school and you’ve been promised all these things by the institution because obviously they want you to take out that that debt and pay them so I you feel like you’re sort of entitled on you’ve been working hard you need to get that new car and there’s zero percent interest car loans you can get that and you know there’s all these different things maybe you need to rent a bigger place or else you don’t you’re done with roommates now you’re not a student anymore you don’t want to live like that and for all these entitlement I don’t know where it comes from or how it develops but it seems pretty widespread pretty pretty Universal in North America at least and I think it prevents a lot of people for making those sacrifices that you guys were talking about yeah I so sorry guys yeah I uh I was really confused for a while when I saw all my friends had really nice cars after graduation and I’m in you know driving my 13 year old tell you out of which I love and I was like I’ll wear these cars coming from like what is this magic and then I found out like the auto loans for that oh like why didn’t you tell me this is how you funding your wife’s I like I thought you must be really richer no you must be making different life choices cuz I it it never occurred to me that you wouldn’t like

pay like you wouldn’t keep your junker around as long as possible like why would you get a car payment if you didn’t have to well you know that the car most often owned by millionaires is a Toyota so there you go but no I was I was goodness i was going to kind of say to Kyle’s point of entitlement we kind of think oh and I think Xena mentioned this a little bit earlier as well I think oh well we’re doing all we can and I remember when my husband and I were first married and um and I had one more semester school left and he still had a year and a half of school left and we were like oh well we can’t spend any less we are like living to the bone we’ve cut cut cut and oh my gosh work or down we can’t we we’re down to the bare necessities we’re spending on just the bare necessities and then we sat down and looked and it’s like no you’re still we’re still paying for cable we go out to eat once a week um we’re buying you know we start looking our like no we feel like we’re living a subsistence lifestyle but we’re really not and and I think part of that goes back to that entitlement we’re like oh well we have to have cable we have to have the iphone well I phones didn’t exist back then but you know you have to say you know there’s you know there’s a whole new set of the that we need to have but these are actually luxuries the needs the many of the needs we have now are actually luxuries and when you start taking a real hard look at it you start to realize that no you can cut a little bit more I don’t like to anymore because I don’t like sacrifice but we didn’t look at our stuff and say no you know we could be cutting more and we really aren’t living you know we really haven’t cut to the bone yet I think a lot of where this keeping up with the Joneses and this lifestyle inflation comes from is instead of us looking at our actually actual budgets and seeing what we spend our money on where it’s actually going we look to see other people and we figure well if they can afford the car if they could afford the student loan if they can afford that and we’re very much similar then I must be able to do it too and then we kind of bank on that we hope on that and it doesn’t really work out you know when we see these new cars we don’t know their story you know we don’t know if mom and dad gave it to them we don’t know if they’re they’re paying through the nose for it you know but we just see the car and we think we can do it and I think that happens to a lot of us and it’s a hard thing I think a big step is making sure you actually look at your budget and seeing what’s going into it and what’s going out and then matching it that way you know I like you said Moran do once you start looking at things you actually were able to find more that you were able to cut back on and we probably all have that so let’s uh let’s talk about this because i think it’s sort of come up but um what’s the opportunity cost of paying off your student debt loans early you know is it always a wise idea you know what are you missing out on if you’re paying so much towards your student loans well you’re losing out on that that early compounding if you want to start retirement saving you wanna start save it you can take a little more risk in your portfolio without losing sleep or mathematically you can anyway whether that’s your style or not so I think that’s what you’re losing by and large some people will tell you all you’re losing going on maybe getting into a house little earlier and that sort of thing but but for me I think the main thing for a lot of young grads they’ve already put off saving for five or six years is that retirement savings and you’re losing out on some sort of prime investments window there yeah that’s a good point yeah so no go ahead um yeah that was one thing that always kind of bugged me because i had read so much about personal finance and I knew like I should be putting money toward retirement I started a ir a when I was in college so that gave me some kind of reassurance that like ok at least I already had this um and then I had a go kind of a scottrade account that I opened a nice to go and forgot about um so but that was something I freaked out about cuz I thought well by doing this right you know like what am I giving up my interest rate was so high that you know is it worth it so it that was one thing that rose struggled with and um the one thing I never did was once I’ve came eligible for my 401k and there was a match with it then i put enough to get the match because i think a lot of people will sacrifice that as well and that’s something that doesn’t really make a lot of sense to me so what do you think is the balance point or the pivot point that where do you where do you go you know what i should put the money towards the student loan or i should find some other place to maybe put that money and i’m not talking about putting

that money into buying more movies or wherever else you know you have some set amount of money that you want to put towards something um where do you would you figure that balance out any type of guidelines for that anybody here would think of well I think it I think you look at what’s your long-term annualized return potential for what you’re getting since I’m old and I consolidated my debt ten years ago and when I graduated I I have a interest rate of less than two percent on my federal student loans so I don’t want to pay them off early because even at the worst of the stock market and just the way my portfolio was set up and everything because I didn’t have everything in stocks but even in the worst of the financial crisis and the recession my investment portfolio still outperformed the interest on my student loans and then once you add in the tax deduction that comes it’s not super fantastic or anything but it’s still there putting my money somewhere else just to me like with the math makes more sense so I think if you’re oriented in that way and you you’re looking to straight at the math and you’re it’s not a gut punch to you then I think that that can make sense if you can say well I can get a better return for my money do I want a 1.9 percent return on my money minus the tax deduction you know and that or do I want this you know five percent annualized return and it’s actually higher than that now so you kind of have to balance that and say well where is my money going to do the most good and I’m a lot of asians sorry cuz they you gotta make sure that you don’t get too overconfident to kissena your six percent rose it he’s funny yeah and someone say well i’m gonna make 10 so i’ll just invested that’s a good point that’s the thing is even at the most conservative you know mine is I mean yours is Allah not really good sorry cuz because of how low the interest rate is and and I’m really fortunate in that way yeah I think a lot of it you know on the one hand it is it’s a mathematical equation where you look at the interest rates on what you could possibly be making with your investments and how much your interest is on your loan on the other hand it’s not just a mathematical equation it’s you know the psychological for the individual some people are going to be more okay with carrying that loan and paying it off over time whereas other people like me I just hate having that weight on my shoulders and thinking oh man I’ve got that 20 thousand dollars but the death sitting there I just want to get rid of it so you know it’s kind of a balancing act I think for a lot of people balancing them mathematical side of it looking at what’s best with with the math and then what’s best for your own well-being and your psychological will be yeah I think Tom makes a great point about not getting too cocky about it too because you might hear Oh historically you can make eight percent let’s say but that doesn’t mean you will make a percent and it also depends on what you put the money into you know if you say I’m gonna buy I’m going to put all this money into apple stock because they’re doing great well who knows for the next three years they might tank and then you know you really not doing as well as you thought you would be doing you know it maybe you want to be a little conservative of what you’re investing in just to make sure that you have a return that would give good odds to doing that on what your your interest rate is yeah for me um I didn’t really do any math on it um but I knew because my interest rate was so high that it would probably benefit me more but that extra money toward my loans but it was it was like a hundred percent psychological um because I think like I see people do things you know like take really long vacations or you know move across the country and they have student loans I think oh my god like you did that and for me it feels like now I have so much more freedom to if I want to move somewhere I can do that and if I want to save no fifteen percent for retirement like I can do that freely now so I feel like I just kind of had to you know give up some things for a little bit too to do what I do now but it definitely it’s such a personal decision that unless like the math is really obvious like like it is for you Miranda that I think you just kind of have to do what what will make you feel better I think the psychological aspect is very important you know it’s how you yeah how it’s going to affect you because having them with the loans on your on your shoulder on your back it it does weigh down on a lot of people so to be able to lift that up I mean does a lot in helping them to move forward in other areas as well oh

yeah definitely and there are definitely people who don’t want that obligation and don’t want to be beholden and paying any interest at all and that’s understandable and I think that if you know that’s your orientation then yeah you should just pay it no matter what the math says if if it’s going to create pit in your stomach and it’s going to cause do grief and you’re going to lose sleep over it then it’s better to be done with it now let me throw out a question here and you tell me if this is nuts or not but um should student loans even exist you know should it be possible to take out 20 30 40 50 100 thousand dollars to go to school um is that something that should be even allowed should our society tolerate that you know is there are there other ways that we should be thinking about this whole issue of educating the public first it first of all I think it’s worth saying well part of the reason why it costs so much to go to school is because of this kind of bubble we’ve created you know everybody has to go and not only does ever be here I have to go but it’s so expensive that everybody has to get student loans if we weren’t in this situation I mean does it really need to cost a hundred thousand dollars is it rude miranda is breaking up a little bit um but yeah it’s for my bubble and the bubbles not that different from mortgage bubbles you know the the easier it is to get the loans and more people that are going to get them the more money that’s in society the more that’s going to feed into the schools and then all of a sudden it costs more and more and more and it does just keep going and like we’ve mentioned the cost of tuition is is growing astronomically you know it’s exponential compared to to what wages are oh I think a lot of the problem could fix could fix itself Glenn if we just I mean I know I’m a teacher so I default to this lens all the time this high school educational lens but if we gave kids the information their parents the information and we’re doing a terrible job of it right now right across the board absolutely atrocious job of explaining the job market of explaining personal finance of explaining the idea of looking at education credentials as not just a lifestyle choice but an investment return if we did a better job of that uh and kids would actually understand um and their parent understand sort of the post-secondary thing a little bit better and make better decisions and that would take the price down on its own these institutions can only survive as long as people keep paying fifty thousand dollars a year to go to school and businesses are quickly learning that that person that read the first year reading list at NYU is the exact same as the person that read that exact same reading list at Community College X like Chaucer and Hamlet and whatever a little bit of Dickens or whatever the case is it’s all the same economics 101 it’s the same textbook at a small town university X as it is at NYU I don’t know why I’m picking on NY you have never been on their campus but it seemed like a like a good thing to pick on its like a backhanded stab at me because that’s from New York of it that’s what everyone always Clinton IVs it felt good to go after some other than I visa yeah I agree completely but he was just saying Kyle and I think too many people attend college with no sort of a plan either they don’t know what major going to do what they really want to accomplish with with their degree and I don’t think they’d probably get enough help in high school figuring all these things out as far as thinking about the return on their investment you know a lot of times it ends up being equation all my you know Joe and John are going to this school I want to go there too and party with them you know so really I think people need to be thinking more about why they’re going to school what they want to do with their degree and for some people maybe that maybe college isn’t the best choice you know maybe there’s a technical school they can go to or some other career that it doesn’t necessarily involve college well and I’ll say um I went to a private school growing up and a lot of the girls I went to school with most of them their parents had a much more money and so they like a lot of people I went to school with were going to private colleges and you know I’m thinking okay well I want to go to private school and I apply to NYU and listen and I was so happy when I got my acceptance letters and my dad looks to me that you are not paying 40 grand a year to be a journalist and I was heartbroken I loved both the school’s I you know they were like they were really good for journalism for what I wanted to do and I was just so upset and I’m so angry at just thinking about like all these upper class um people I

went to school with that they didn’t have to worry about that they did not have to make a decision based on money um they could just go to whatever school they wanted to go to and and so that bothered me for a while and then I you know got to college and I feel like I had as good of experiences you know I might have anywhere else and I there is like this pressure to go you know to go to Harvard or to go to that big-name school and no one tells you that it’s what you do that matters and not necessarily where you go and that that’s what worries me is that it’s like this push that okay well this is a better school this is a better name it’s going to look better and I have to go here and you know payout for it and study after study shows that that’s ridiculous premise it just doesn’t hold true anymore and anyone that hires people knows that frankly but let’s go to your point of of educating people on better we’re not educating people who were full-on adults better uh and similar to zina I took a personal finance course in college it was an economics elective and most of the class that they were younger than me and you know they heard it might have been an easy elective they just want to get it done with it really didn’t care about what the topics were you know and here it is it’s a college course that we were taking I loved it because it was kind of my wheelhouse already but um you could tell a lot of the students really didn’t have much of a care in it so how do you get that education educating the people better just doesn’t seem to work so I got a couple observations not sure if they’re magic bullets but first thing is your college professor and and again this is brought to you by my teachers union that college professor is it’s not trained in education they’re just smarter which doesn’t mean they’re good teaching anybody uh well hopefully they’re smart assuming they have a degree but anyway that’s a whole other uh in high school we’ve got you trapped to that seat if we make high school the point of entry you are there no matter what and you’re used to taking stuff in and I think there’s a little bit less competing for your time than in college for most people so I think it represents a little bit of a better cross direction at that point I mean you’re still going to get a lot of to know and a lot of stuffs gonna sort of wash over but I think I with the more media stuff that comes out and the more blogs the commode and the more press that these people with two-hundred-thousand-dollar art history student loans have the more times we see that story the more people are going to realize man i really need to look into this and right now we’re just caught in this weird transition phase between like the 1960s economy where people like no go to school you’ll get a great paying job it’s a path to riches and the modern economy where it’s like no the correlation is really foggy like we don’t know there’s some areas where it is like that there’s a lot of areas where it’s not and you sort after your own research I think that’s a good point you know we’ve talked about this on the show before you know what degree is worth it and and what what’s going to be worth it as far as getting getting the degree whether you need to go to grad school all of that kind of plays into it there are plenty of good jobs you can get with a two-year degree or a special certification and so looking into that makes sense the assumption that we all have to have you know four-year liberal arts degrees i think is pretty faulty and once again feeds into this so going back to Glenn’s original question I think you’re good I think some sort of basic training or education might not be a bad idea if you can if we can bring the cost down I just wonder if there’s some kind of behavioral economics point of you know we probably all value ourselves much higher than we think we are how many people are going out there saying you know for X job yeah you know I know I’m not gonna make a lot of money you know then nobody thinks that they’re gonna have like a cruddy job you know they think that somehow or other it’s gonna build up you know maybe in the beginning it’s not gonna make a lot but I don’t think people generally go you know if the rest of my life I’m just not gonna make a lot of money even though more college which is not going to happen you know so I think there’s sort of that that failure to you know when we start to ask people look at what you’re you’re going to go into and will you make that money or not right do you think do you think maybe the University College Community College should it be something that is for the good of the people should taxes pay for it or or or some other system like you know should we have to pay so much for it you know we don’t pay for we have public school up through high school so why not extend it a little bit more that’s all I think it just depends on you know what kind of

investment you think it is in society do you think that it’s an investment in society to have an a you know a more educated populace or do you think it’s just going to you know make people who think too much really yeah I know I in my personal life and for the record I think we’ve got a pretty good balance here in Canada generally speaking on when it comes to the personal versus government side of it but in my experience there’s very little correlation between people that go to high-priced universities and general intelligence and people who start their own business or go to Community Schools I don’t buy into the idea that your your basic reading list on a three and four year degree that people can skate through with season these makes you a smarter person or a a better person are better functioning adult in a democracy I don’t see the evidence for this well I guess it goes back to to a kind of education or we talk about skills education or are we talking about your general education um well okay so you’re always going to have private universities you know some university it’s going to be the prestige and it’s going to cost a lot of money we know that um should there be more universities though that may be your public universities that are free there are certainly a lot where the cost is less you know you know we go back to digging on NYU when I first went to school I went to brew college which was kind of up the block from NYU and we always hated the NYU people because they always had a campus that was the village in New York and it was great and we just had a few buildings that were scattered all over the place um but my tuition I could tell you was probably the cost of their books and you know the generation before me it was free so you know there is a big difference should something like that be covered for people who might uh really want to go I think it would be nice um I think I think that it would be I mean one of the things i do like about the Canadian system is that a lot of them there’s there’s that credit that’s offered right that savers credit that you can use to like kind of help boost your resp right twenty percent always automatically yep Thank twenty percent who step to five hundred dollars a year yes I mean I think something like that where you can kind of get a little help with that I mean we have our 529s and you know thank heavens that’s off the table now but yeah for now for now um so I think something like that to encourage people i don’t know that it’s practical to say oh well every everybody can go free just because we have such a large and diverse population it’s nice that everybody points to scandinavian countries and say oh well look what they can do they’ve made it free for everybody and that’s so fabulous and it is fabulous and it’s great but one of the reasons why they can do things like that is they’ve got a very they’ve got a much smaller and much more homogeneous population this is really hard for me to say because you know I’m a liberal and you know of course I just think everybody should have everything for free all the time but but but I I don’t know that that’s practical to just stay say straight up you know two years of college for free i do not know how practical that is in our current economy and with the current realities of our system and i think to there’s something to be said for putting more value in your education you’re paying for it to you know if everybody’s getting it for free a lot of times oh it’s just it’s free you know it’s no big deal i’m not going to take it as seriously because i’m not i’m not actually paying for so to me you know i had to pay for a lot of my own education and because of that i think i took it more seriously it’s like I’m paying thousands of dollars a year to go to the school I’m gonna get the most out of it I’m gonna get up for that 8am class even though I was out last night because you know I don’t want to flunk this class so well it would agree i think there’s something to be said for that too i think we should stop making stop making people feel bad if they you know they’re not the type who should go to college like there’s nothing wrong with with going to a trade school or doing something else and i feel like there’s a lot of stigma around it um and you can make a good living you know plumbing or electrical work um and there’s no shame in that but I feel like like I know so many people who if they didn’t go to college they kind of have a chip on their shoulder and even if they’re working in the same job you know they’re still kind of cool they don’t have degree so I feel like when you’re telling everyone well if you don’t go to school then you’re not as good then that creates a higher demand for it oh yeah I make itself is not keeping up with the Joneses so I think we’ve we’ve gone into a really great discussion here and I think we could spin off that last bit into its own show about whether

education should be free or not but uh we’re going to coming up two hour time limit here so I think we’ll go around and do a final word on paying off student debt loans and before we close out so Kyle if you’ll give us your final word on paying off student debt loans uh paying off student debt loads I’m going to do a bit of an infomercial for manitoba and some of the other canadian provinces school is already free if you come here if you stay at manitoba for six years after you graduate you’ll get sixty percent of your tuition back it’s the exact same in saskatchewan which is twice as much fun to say is manitoba and it’s right next door uh-uh and we’ll give you money just for working after you graduate we give you your tuition back so if you combine the tax credits and that money back if you stay in provence you will effectively have a free education already so the economic part of me is as you know Kyle’s just uh invited a bunch of people over there but now housing prices are going to go up there everyone’s moving right for the free edge of bring your children to secure my job as a teacher here I Miranda your final word on student debt loans yeah so kind of going along with Kyle’s theme there the u.s. you know that does have some programs where you can get some of your student loans paid back my mother is actually you know getting a little help with her student loans getting payback because where she has chosen to teach after finishing her teaching degree um so there’s those things to think about things like AmeriCorps will help you joining the military although I know a lot of people don’t wanna do that right now and other civil service type things can help you pay your loans back so that’s something to think about as well along with kind of following up on Kyle’s thought there if you’re if you’re willing to make a certain I guess you could call it a sacrifice there are ways to get a little help paying off your student loans and then the other thing of course is if you can stomach it you know run the numbers and see if it’s really worth it to pay it off early all right Peter your final word on paying off student debt loans mmhmm yeah well basically my thoughts on this topic are you know the average debt for somebody in the US for four-year degree is thirty-three thousand dollars and Canada its twenty six thousand dollars in 2014 so for me it really goes back to thinking about these things before you get into the debt you know things start thinking about this when you’re in high school think about what you want to do with your life have a plan think about what kind of a degree you want to get or even if you need to go to college before you get into that debt but once you once you do decide you want to go ahead with that make sure again you have a plan think think about having a budget while you’re in school maybe cut down those discretionary expenditures while you’re in school just a little bit and save some of those costs so you’re not paying them for years and years down from and Tom what’s your final word um I think student loans can be pretty useful but but yeah make sure you actually have a job that can can pay for them don’t don’t go to a big expensive University to find yourself like you can do uh but make sure there’s that return on investment if you’re going to take out the loan make sure you can pay it off quickly like Xena did if you can like good especially if it’s higher right nowadays like make sure that what you’re investing in with that student loan actually pays for itself and xena fuel close out our final word on paying off student debt loans um I would tell people that know everyone should just get a budget um I didn’t happen in college because I thought like my expenses were too irregular to do that which is really lame excuse um and then once I started getting when I realized like how much I was spending so I think it’s really easy to like Miranda said earlier um to think what you’re living with the bare-bones and you’re doing the best you can and most people aren’t so that’s what I would say is just to get a budget pick up where you can cut because I mean we can all cut um we can all make some cuts so that’s what that’s what I would say assoc if you’re in school there’s you don’t need as much for your money as you think i don’t know Kyle might disagree disagree no no I think there’s ways to get that money extra work saturday so thank you so much Xena for joining us for our audience out there can you tell them a little bit about what you do and where they could find more information about you yeah so I write about um well how I paid off my loans and I write about saving budgeting just living a good life unless at debt free after find me at twitter at xenical macht ein a um ok great and

thank you again for joining us and for everybody out there thank you for watching and listening and until next week be good with your money thanks for joining us on the money mastermind show get more information at money mastermind show com don’t forget to subscribe to the show on iTunes in YouTube and follow us on Google+