Hey my name is Jess. This is my journey. I'm a student at UNC-Chapel Hill. I'm $45,000 in debt after a year at NYU and two years at UNC. I've set a Big Hairy Audacious Goal to get out of this debt by the time I graduate in May 2010. You can also follow me on Twitter via @poorstudentnomo. Thanks so much for your encouragement and support!
Do you know what your FICO score is? Should you consider consolidating your student debt? Do private colleges really provide better educations? Should you refinance your college loans?
Contrary to my assertions on this website, student debt is not a major problem, according to New York Times writer Jack Madden. The article “Student Debt Rises, but Is Termed ‘Manageable’ for Most,”says that the majority of students who take out loans actually graduate with a manageable amount of debt according to a brief released by the College Board.
A concern arises in reference to the word “manageable.” What exactly do they mean by that? That may mean that you will be able to afford to pay the minimum monthly payment, finally paying off your loans in 30 years. Rather vague, isn’t it?
What if it means that, based on your salary, you can afford to pay your loan payments but can only afford to pay $200 per month for living expenses. Here’s another twist: your job is in New York City. Do you really think that’s “manageable?” I hope you can find a roommate for the refrigerator box you’ll be living in.
Of course, this is all a bit far-fetched, and probably not the scenario in most cases. Graduates usually find a way to make their monthly payments — otherwise the whole model would fail. But being able to make your payments and having the ability to pay off your debt are very separate and different things. Paying off your debt requires more than “manageable” payments — it requires an action-oriented plan toward your own financial freedom.
Peace, love and loans,
I am sitting in JFK airport, waiting to board my plane back to Raleigh, NC watching the young man in front of me performing tai chi (quite a beautiful type of movement). I wasn’t expecting to be here, and am now using my time to reflect on Poor Student No More.
I am the type of person who has fought against money as a motivation for years. I always told myself that I should not commit to something purely out of selfish desires for financial gain. Lately, I’ve been having serious personal dilemmas with this site, as the goal of this site is to create enough passive income to pay off my student loans in one year. Have I sold out? Am I becoming a self-indulgent, social media marketing whore? Am I really doing this for the right reasons? Am I passionate about this? Is this in any way helping others? And even if it is, am I really motivated by that overarching purpose?
I have to admit that I’ve become quite frustrated as well with the slow progress. My frustration in my lack of income from this really made me realize that I needed to reevaluate my motivations, goals, and purpose. If I am frustrated with my lack of earnings, I am not in the right mind-set.
I flew to Boston at the last-minute last night (August 11) to try to salvage a relationship that is extremely important to me. It was completely irrational, extravagantly priced, not at all good for my finances — but absolutely worth every penny and every minute of my time. During hours of in-depth conversation, I brought up my frustrations and concerns hoping for some solace and advice. My friend told me that even having these debates with myself indicates that I have a purpose and motivation much deeper than money. He encouraged me to continue, to keep writing about my journey and keep informing others like me about the trap that can come from student loans. It can serve others as long as my content is quality and as long as I believe it is of the greatest value.
I thought a lot tonight on my plane from Boston (especially while waiting on the runway thanks to FAA delays). Yes, I am doing this to try and pay off my student loans. Yes, I am doing this to make money. But that money will go toward putting myself in a position financially in which I will have the ability to help so many more people on such a larger scale than if I were to remain in debt.
And the content on this page has the potential to grow and serve others as a tool for their own journey out of debt. And the money I can make from it will not go toward frivolous material objects (I’ve never really enjoyed shopping…), and I have quite successfully learned from the consequences of being “young and stupid” in hopes of preventing more of the same decisions. Though I cannot claim sainthood and must admit to the mistakes that come from the rare catastrophe of my personality, I certainly now know that I cannot use money as an outlet for my youth.
No one wants to spend their lives working at a mediocre job that they don’t like so that maybe, just maybe, they can quit when they are 65 and garden with their new-found spare time.
We are a generation with such talent and unequivocal access to resources. We have a great challenge before us, but immense opportunity as well. We must prepare ourselves to meet these challenges, which includes eliminating our own obstacles.
Student Debt Statistics for your viewing pleasure.
Private 4-year institutions:
State with highest average debt - Arizona - $41,302
State with lowest average debt - Alaska - $10,197
State with highest percentage of students with debt - Alaska - 93%
State with lowest percentage of students with debt - Utah - 36%
Public 4-year institutions:
State with highest average debt - Alaska - $27,043
State with lowest average debt - Hawaii - $12,583
State with highest percentage of students with debt - South Dakota - 80%
State with lowest percentage of students with debt - Hawaii - 30%
Source: Calculations by the Project on Student Debt on student debt data from Petersons’s Undergraduate Financial Database, copyright 2007, 2008 Peterson’s, a Nelnet company; state and sector data from National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Fall 2006.
Average cost of a 4-year university (public or private), including tuition, room and board 2007-2008: $19,362
Average cost of a 4-year public institution including tuition, room and board 2007-2008: $13,424
Average cost of a 4-year private institution including tuition, room and board 2007-2008: $30,393
*note - cost of 4-year university is consistently more than “other 4-year institutions.” Explain the difference!
Source: Digest of Education Statistics 2008. Institute of Education Sciences - National Center for Education Statistics. U.S. Department of Education, March 2009.
Total fall 2007 undergraduate enrollment in degree-granting institutions: 15,603,771
Total fall 2007 undergraduate enrollment in 4-year private institutions (full-time and part-time): 3,172,377
Total fall 2007 undergraduate enrollment in 4-year public institutions (full-time and part-time): 5,813,773
Source: Digest of Education Statistics 2008. Institute of Education Sciences - National Center for Education Statistics. U.S. Department of Education, March 2009.
Total freshman enrollment in institutions: 2,707,213
Total freshman enrollment in their home state: 2,178,745
Total freshman enrollment out-of-state or out-of-country: 528,268
Percentage of undergraduates receiving aid 2005-2006: 70.3
Percentage receiving aid from public 4-year institutions: 76.6
Percentage receiving aid from private 4-year institutions: 85.4
Average amount of financial aid awarded to full-time, full-year undergraduates 2003-2004: $9,899
Federal Grants: $3,247
Federal Loans: $6,426
Private Grants: $4,828
Private Loans: $6,089
Work Study: $1,942
Number of undergraduates, full-time, full-year, all institutions 2003-2004: 7,824,000
Cumulative amount borrowed for undergraduate education 2003-2004 (average per student): $12,750
Percentage of undergraduate students who have credit cards 2008: 84%
Average number of credit cards 2008: 4.60
Percentage who have 4 or more cards: 50%
Average credit card debt: $3,173
Median credit card debt: $1,645
Estimated amount charged for direct education costs: $2,200
Source: “How Undergraduate Students Use Credit Cards.” Sallie Mae’s National Study of Usage Rates and Trends 2009.
This is going to be the very, very basics of making your own personal financial statement. Reading Rich Dad, Poor Dad inspired me to do this, and though it is an extremely simplified version of the common financial statement prepared by an accountant, it is a simple reminder of your goals and how to get there.
There are only four simple categories that you should absolutely list in your first financial statement: Income, Expenses, Assets, and Liabilities.
Income: List all income that you receive monthly from your work.
Expenses: List all of your monthly expenses. These are the things that you must pay money for each month like rent, utilities, food, alcohol (if you are the average college student), cell phone bill, etc.
Assets: Things that put money into your pocket. Should be forms of passive income that are secure. Example: Poor Student No More.
Liabilities: Things that take money out of your pocket. A mortgage or rent, credit card bills, fruit of the month club.
These are EXTREMELY simplified definitions, but they certainly keep it simple and get the job done. I’ve found that keeping it simple keeps me focused on my ultimate goal: grow my assets larger than my liabilities (in monetary value) and make my passive income greater than my expenses.
So, put these into four columns and start listing your items with descriptions and amount ($). Total up the values for each column.
Next, make a prospective financial statement for exactly 1 year after. What do you want this sheet to look like? Be sure to keep it realistic though! Work with what you have, but don’t sell yourself short either!
Post both of these statements somewhere where you can see them every day — your wall, mirror, in your closet, on the fridge — and every month make updates on your progress. As you go along, you’ll find out what works, what doesn’t, and how to optimize your progress.
Don’t freak out if you don’t reach your goals in 12 months! Keep working and figure out why you didn’t hit that goal.
After you reach your 12 month financial plan goals, start setting longer term goals — 3 years, 5 years, and 10 years. These will be less detailed, but very worth it in the long run!
I recently finished reading Rich Dad’s Guide to Investing, the follow-up to Rich Dad Poor Dad that provides an in depth look into the worlds of business and investing. The book provides substantial and valuable insight into not only the philosophies of the rich, but specific practices and tools to use as well. I highly recommend this book to those who wish to change their way of thinking and move toward a life of financial freedom and independence.
One of the greatest lessons I learned from Rich Dad’s Guide to Investing is that you do not have to acquire assets through purchasing them. You should, in fact, learn how to create your own assets. This got me thinking of my own assets and liabilities on my own personal financial statement. My assets column doesn’t really have anything in it, and while I stared at that blank column, I felt absolutely worthless.
So, I decided to start thinking about the potential assets I could create and how I could turn the ideas into realities, no matter how crazy or outlandish they seemed. I also found during this process that I do have assets now that I should list. I started filling my assets column and it now looks like this:
Education - knowledge of international relations, conflict resolution, and development
Passion
Work ethic
Perseverence
Creativity
PSNM (Poor Student No More)
The first six are not putting money into my pocket as of now, but I always want to remember what my REAL assets are. Those characteristics will be the driving force behind my financial success.
My suggestion is to look at your personal financial statement at least once per month and each time, have a short brainstorming session in which you write down ideas for creating assets. Most importantly, you do not need an already existing amount of money to transfer ideas into tangible assets. Use your intellect, experience, creativity and character to find a way to make it happen.
My liabilities column heavily outweighs my assets column in terms of monetary value, but I know that this is only temporary. Don’t sell yourself short and realize what your true assets are — then take it and run with it.
My goal by May 2010 — grow my assets column bigger than my liabilities.
It has been six weeks since my decision to get out of debt before I graduate and since my first post on my introduction to debt. Since then, I have successfully set up and learned how to use Google Analytics and Google Adsense, learned how to optimize my use of keywords for search engines, and written 14 posts on student debt, debt consolidation, good debt and my plan to get out of debt.
My Progress
To date, I have made $26.05.
I have had 115 visits, 188 pageviews, and 91 absolute unique visitors.
Out of the 115 visits, 14 are direct traffic, 28 are from search engines, and 73 are from referring sites (Twitter, Stumbleupon, Twellow).
I have increased my Twitter followers from zero to 467 in about two weeks and started tweeting about my journey, which has driven the majority of traffic to my site.
So what’s next?
I am hoping that with more legitimate and valuable content, my site will rise in the search engine ranks under keywords like “student debt,” “student loans,” and “debt consolidation.” To make this process a bit quicker, I am planning on building links on other websites, encouraging feedback and comments from readers, creating an email list-serv, and continuing to use social media for direct marketing (Twitter, Facebook, and Stumbleupon). The goal is to increase the amount of “organic traffic,” or visitors that come from search engines.
I am also planning to learn more about online marketing techniques that can be valuable in driving more traffic to my website. I am very new to online marketing and have not yet figured out how to optimally reach my target audience.
As the weeks go on, I am learning extensive information about student debt and college loans — things that I should have known long before I got myself into this mess. Ultimately, I hope that this will eventually help others look before they leap into the black hole of student debt.
I remember one day in my first year economics class at NYU, my professor was talking about deciding to purchase something based on individual preferences and perceptions. He used the example of paying for college, explaining that in most cases it is a good decision to incur the debt of paying for college because it will increase the value of your skills, therefore increasing your prospective income. The future value of that college education would be greater than the debt you would incur in the present - meaning that you could pay off the debt quite easily. He added on to the end, “and NYU students have an advantage because they often have much higher salaries than most.” He described this kind of debt as “good debt,” - an investment.
I loved this. I loved that it justified my decision to take out a giant student loan to go to NYU and live in the big city. I loved that it calmed my anxieties about incurring such a large debt at the young age of 18. But, I kept thinking of how I could have bought a quaint house with the same loan I took out for college, and wondered if it was really the right decision.
What I have learned from reading Rich Dad, Poor Dad, my research and my discussions with my financial guru friends is that a college education isn’t necessarily “good debt.” This concept relies on making an investment that will have high returns in the future - increasing your value and wealth. However, this is an incomplete definition.
The investment should provide you with tools to increase your passive income. The way my professor explained it, you would still be working for a monthly salary, not gaining passive income that would increase your financial stability. Therefore, that debt would still be a liability instead of becoming an asset. Monthly income is not considered an asset.
Now, I am not saying that you shouldn’t go to college. The education you receive can be vital and extremely valuable. But I highly suggest organizing your goals for your career and researching your desired career. How much, on average, will you make? How quickly can you work your way up a pay scale? How quickly would you like to pay off your debt? What kind of payment plan will that require? Does that work with your monthly salary?
The value of your college education should be weighed with your intended career choice. And instead of working to pay off your education, find ways that you can make your college education work for you. Find means of creating a passive income with your talents and strengths. Then, you can pursue your desired career without selling your soul for healthcare or a monthly salary. You can be more selective in which jobs you pursue and have more control over where your career goes.
So, if you decide to go to college, do not simply accept that it is a “good debt.” If you do not educate yourself about your personal finances and find ways to apply your education to build your passive income and financial stability, it is NOT a good debt. It will only remain a liability that influences your choices, both in life and your career.
The poor student is back from Africa where I studied social issues, economic development and conflict resolution. Now, back to work on paying off my debt so that I can focus on changing the world! Updates to come soon!
I’ve been working a lot today on student debt and trying to cure mine. The website is going well for only having been in action for about 1.5 weeks. I’ve made over $5.00, which is exciting, and I got my first google search! I’ve been trying to learn how best to advertise my blog, as I think I have pretty concise and important information that I wish I had known before I got myself into this situation.
Marketing techniques used so far: Social media networks like Twitter, facebook and stumbleupon. I am becoming one of those twitter fiends that tries to find every way possible to get more followers. I’ve even set up my tweets to automatically update throughout the day. And I even do a little fist pump every time someone retweets me. Wow. I have officially become a geek.
Important goals: If I want my information to be available to as many people as possible, I need to create links. In order to get indexed and higher on the search engines, other sites need to link to PoorStudentNoMore.com (shameless). I haven’t quite figured out the best way to do this yet, so if you have any suggestions, please feel free to share!
Keep posting good content: It’s so important to me to be financially independent by the time I graduate so I can follow my passion and do exactly what I want to do in life. And I know that there are so many other people out there in my situation. If this can work, I think that this can provide a great learning tool for many people to come up with ways to get out of their debt too.
I’m also preparing for a trip to Kenya, Uganda and Tanzania to work with WOMEDA, a non-profit for women’s rights. I am excited about going and know that getting out of debt will put me so much closer to being able to travel to the areas where I can apply my knowledge of conflict resolution and have a positive impact in the global arena. Freedom to use all of my time and talens to change the world is my motivator… What’s yours?
Do everything possible to avoid it: Apply for deferment, get a third and fourth job, sell your vital organs, whatever it takes. Just kidding about that last part.
But sometimes things happen and we end up having a lapse of judgment or let circumstances get out of control, and you cannot afford your payments.
If, for whatever reason, you happen to default on your loans, this is what happens and what you should do:
When you default, your loans can be turned over to a collection agency. You can also be sued for the full amount of your loans, taken to court, and required to pay the court fees. The government may take a percentage out of your paycheck each month to start repaying the loan. Basically, once you default, the lender can use whatever legal means necessary to get their money back. Default can also prevent you from renewing professional licenses or enlisting in armed services.
To get out of default, you must arrange payments with your lender. These will have very strict rules and criteria, as you are now expected to default and you are risky. After six consecutive, on-time payments, you are eligible for Title IV aid. After 9 or 10 on-time consecutive payments and received “rehabilitation,” you will no longer be considered default.
“Rehabilitation” means that payments are adjusted to be “reasonable and affordable” based on your disposable income. Payments can be below the minimum payment if the lender so decides.
Again, do everything possible to avoid defaulting, as it will set you back in actually paying off your student loans, as well as any other debt you may have.
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