Author Topic: Case Study: Graduating college with zero debt?  (Read 3193 times)

Cwadda

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Case Study: Graduating college with zero debt?
« on: June 25, 2014, 01:57:20 PM »
Hi all,

I just turned 20; entering my Junior year of college. Currently pursuing a degree in Environment Science but might also get a Geology degree in addition to that. Still figuring out what I want to do but I'm well ahead on credits so there's not a lot of pressure for that.

Income:
I'm going to break this down by year because my work is kind of scattered - I don't really work much at my internship during school.

Internship in summer and other breaks: $10,000/yr
Internship gas compensation 56 cents/mile estimated: $2,000/yr
Music directing year round: $9,100/yr
Additional music jobs: $400/yr
Yardwork and maintenance: $500/yr (toward debt only)
Condo work: $??? unknown value (toward debt only)
Monthly income: $1800/mo (money for myself and not debt)

Current Expenses:
Rent: None, I live at home
Food: Same as above. I do cleaning, laundry, and other chores whenever I can at home.
Lunches/Dinners (anything going out related): $20/month on average
Entertainment: $20/mo on average
Estimated gas: $110/mo
Car insurance: $35/mo (It's low because I pay half and my parents pay half)
Phone: Parents pay for
Car repairs: Would estimate $25/mo although I had to put $800 into my car when I bought it a month ago.

Monthly expenses: $210/mo

Assets:
Roth IRA - $11,500
Car - $4000 (I own half, my parents own half)
Savings - $2300. I'm putting down another $1000 on my government loan in about 1 week. I have to get my work expenses check back first.
Paypal - $200

~$18k

Liabilities:
Loan from my parents: $16k at 0% with another $13k/yr added for 2 years = $42k for college
Government loan: $4,725 at 6.8% annual unsubsidized
Tax payments: $200 (Penalty for over-contributing to my Roth; I learned my lesson)

~$47k


Financial goals for this year:
1. Pay off government loan by the end of the summer.
2. Max out my Roth for 2014.

Financial Long term goals (by the time college ends)
1. Max out my Roth IRA every year.
2. Graduate with zero debt. The big question...is this possible?


Thanks for reading!

nereo

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Re: Case Study: Graduating college with zero debt?
« Reply #1 on: June 25, 2014, 02:16:27 PM »
Sounds like you are on a golden track.  Keep it up!

Regarding your only stated question (The big question...is [graduating with no debt] possible?): Given your expenses and income you should have no problem kicked the unsubsidized loan out this year.  You shuold be able to nix most of hte loans to your parents as well, but at 0% interest i'd put that behind funding your IRA nad making sure you have some taxable long-term savings as well.

Also - just an aside, I cringe whenever someone includes their car as an "Asset".  It's only an asset if/when you sell it.  Otherwise it's an expense you need to maintain and insure.


Cwadda

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Re: Case Study: Graduating college with zero debt?
« Reply #2 on: June 25, 2014, 02:29:09 PM »
Sounds like you are on a golden track.  Keep it up!

Regarding your only stated question (The big question...is [graduating with no debt] possible?): Given your expenses and income you should have no problem kicked the unsubsidized loan out this year.  You shuold be able to nix most of hte loans to your parents as well, but at 0% interest i'd put that behind funding your IRA nad making sure you have some taxable long-term savings as well.

Also - just an aside, I cringe whenever someone includes their car as an "Asset".  It's only an asset if/when you sell it.  Otherwise it's an expense you need to maintain and insure.

Thanks. And thanks for the advice and links several months ago when it came to switching into Vanguard! I'm so happy with how my money is doing there and at low fees!

I do also cringe to call that an asset. It's more of a liability if anything because it's drawing money out. So yeah, not an asset but I put it up there.

Cwadda

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Re: Case Study: Graduating college with zero debt?
« Reply #3 on: June 26, 2014, 08:47:31 AM »
Any other thoughts?

darkadams00

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Re: Case Study: Graduating college with zero debt?
« Reply #4 on: June 26, 2014, 07:38:03 PM »
Although your parental loan is at 0%, I personally couldn't treat that loan the same as a 0% loan from a private company. I would be pressing to pay that off sooner rather than later. You might have the best parents in the world, but personal independence from my parents would have been my first priority--above FI for myself. I wouldn't stretch out the parental loan over any more years than I needed. If you can make that level of income during college, then I don't think income after college will be a major concern. Even if you don't save another dime toward retirement before you erase these college expenses/debts, you will still be able to retire by 35 yrs old or earlier---not a bad option and the most likely one to keep family harmony at its optimal level.

bako_frugal

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Re: Case Study: Graduating college with zero debt?
« Reply #5 on: June 26, 2014, 10:12:15 PM »
If you are in environmental sciences, go look into some high paying seasonal summer jobs to keep your income up and get some good experience.  I'm talking things like the Alaska fish canneries, summer construction road-crews, etc. 

It will help you understand the realities of the industries you will be working with also.

Why would you want a geology degree? There is not much value in a geology degree without a M.S. and really only if you are looking at petroleum industry or mining.  Even if you are looking at petroleum or mining you are much better off with an engineering M.S. 

Cwadda

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Re: Case Study: Graduating college with zero debt?
« Reply #6 on: June 27, 2014, 06:32:43 AM »
Although your parental loan is at 0%, I personally couldn't treat that loan the same as a 0% loan from a private company. I would be pressing to pay that off sooner rather than later. You might have the best parents in the world, but personal independence from my parents would have been my first priority--above FI for myself. I wouldn't stretch out the parental loan over any more years than I needed. If you can make that level of income during college, then I don't think income after college will be a major concern. Even if you don't save another dime toward retirement before you erase these college expenses/debts, you will still be able to retire by 35 yrs old or earlier---not a bad option and the most likely one to keep family harmony at its optimal level.

I totally agree. Even though it's 0% I want to pay it off ASAP after my Roth has been maxed. Hopefully this will be in line with when my dad retires so I can supplement his retirement income.


Quote
If you are in environmental sciences, go look into some high paying seasonal summer jobs to keep your income up and get some good experience.  I'm talking things like the Alaska fish canneries, summer construction road-crews, etc. 

It will help you understand the realities of the industries you will be working with also.

I'm doing just that this summer. Environmental consulting for worker safety for building materials. It's a school project that lasts all summer. Lots of overtime.

Quote
Why would you want a geology degree? There is not much value in a geology degree without a M.S. and really only if you are looking at petroleum industry or mining.  Even if you are looking at petroleum or mining you are much better off with an engineering M.S.
I've always been more interested in Geoscience. I'm a year ahead in credits so getting another degree wouldn't hurt. I'm set on getting a Master's degree in something, but don't know what yet. I am shying away from petroleum/mining because I don't want to be traveling to remote locations for extended periods of time (I live in the north east). I would be fine with moving somewhere for a more permanent life though. Can you talk a little more about your geology knowledge? Why do you think the degree is only valuable for petroleum/mining? What other geology fields are out there? What will a M.S. in Geology do for you?
« Last Edit: June 27, 2014, 06:43:37 AM by Cwadda »