Help: College student unsure of what to do???

[redwood_canyon]

As a first year College student at 19 who hasn't held a job I am at a disadvantage,but hey you have to start some where. I plan to get a job this semester and over the summer, to help save up for tuition.

A considerable amount of Student debt will fall upon me this semester, 8K. (2.5k @ 9% and 5.5k at 6.8%) But being a Material Science and Engineering major I suspect in my first two years working I will pay off all my student debt. Parents are assisting with a considerable college fund, but know enough that I should have ownership of my education. (Which I will happily take as debt is a huge motivator)

My current goal is to save 10k to help assist with my tuition expenses next year, mitigate the need to take out loans. I also want to invest a portion of my income for my investments mostly indexes.

Current numbers:

Retirement Schwab account: 3.6k split between the low fee SWTSX, SWHFX, SWSSX. And also dividend paying T
(most to all gift money I receive goes in here, the gift that keeps on giving)

Savings: $814 embarrassingly low, however I would rather have more in investments. When i get a job I would like to figure out a healthy ratio of investing to savings cause knowing me I would like 75/25 or something extreme like that.

What would you recommend doing?

Rn I am thinking about mostly focusing on saving, putting away maybe 15-20%. The thought would be to mitigate the need to take out further loans.

The other thought is not to worry about the loans since it will be likely I can pay them off in the first two years of work post graduation. However still build a nice savings buffer 10k or so but do something more like 50/50 investments and savings.

Also If there are any questions or other recommendations feel free. Also feel free to really lay it on me. :)

[former player]

Congratulations on having a head start on mustachianism and retirement investing at 19.  You will be fine almost whatever you do.  Having some paid work while a student looks good to any potential employer, but not so much that your grades go below the usual employability levels for the sort of jobs you will want.

Those rates of interest on potential student loans are higher than you could expect to earn from investing, so arithmetically speaking you should concentrate on putting your earnings towards not taking out student loans rather than putting more into a retirement fund.  I would suggest leaving that fund as it is for the time being.  Or perhaps put any future gifts into it to round it up to a easy to remember number you can look back on in 20 years?  It's a nice start for your future self whatever you do.

I'm assuming here of course that any earnings while you are a full time student will be low enough that you are not paying much or any tax on them - if you are going to be paying tax then the calculation might change in favour of some more tax-free investing.

You probably need a limited amount of savings/emergency fund while you are a student, on the grounds that you won't have financial responsibilities to anyone else or ongoing and relatively immutable expenses such as a mortgage and that you have decent health insurance.  That means your current level of savings looks OK to me.  You might want to revisit that going into your final student year because at the end of it things like interview expenses and moving expenses, rental deposits and car purchases could start to kick in before wages start being paid.

[redwood_canyon]

Congratulations on having a head start on mustachianism and retirement investing at 19.  You will be fine almost whatever you do.  Having some paid work while a student looks good to any potential employer, but not so much that your grades go below the usual employability levels for the sort of jobs you will want.

Those rates of interest on potential student loans are higher than you could expect to earn from investing, so arithmetically speaking you should concentrate on putting your earnings towards not taking out student loans rather than putting more into a retirement fund.  I would suggest leaving that fund as it is for the time being.  Or perhaps put any future gifts into it to round it up to a easy to remember number you can look back on in 20 years?  It's a nice start for your future self whatever you do.

I'm assuming here of course that any earnings while you are a full time student will be low enough that you are not paying much or any tax on them - if you are going to be paying tax then the calculation might change in favour of some more tax-free investing.

You probably need a limited amount of savings/emergency fund while you are a student, on the grounds that you won't have financial responsibilities to anyone else or ongoing and relatively immutable expenses such as a mortgage and that you have decent health insurance.  That means your current level of savings looks OK to me.  You might want to revisit that going into your final student year because at the end of it things like interview expenses and moving expenses, rental deposits and car purchases could start to kick in before wages start being paid.

I personally did not do well my first semester, 18 credits was a bit much for someone who is still learning study skills, ended up with a 2.2 gpa. I am retaking 2 courses with grade replacement which will bring it back up. I have accepted that I will have to attend a local community college this summer to catch up and would like to pay for my mistake 1st semester, my parents were so understanding. This semester having only 12 credits a job part time ~20 hrs. is going to be helpful in scheduling myself out.

Thank you, yes it would be nice to keep track of where things came from. I have a detailed binder where I note gift amounts and the giver as well as how many stocks the gift purchased. It should be nice when I am looking back to say that $60 the _______ 's gave me or that $100 my uncle gave me is now worth, (insert exorbitant growth when I am 40/50).

I am more concerned now about saving up to prevent more student debt thank you for emphasizing the reasons that is more important! Even more so since I am losing a scholarship next year.

Taxes will most likely be in my favor as you stated, or at least the amount of income so small that they wouldn't be too bad.

Ok is not Ideal I understand, with your insight I am going to change my plan to only save to pay off debt and an emergency fund maybe around 2K just to be safe (by the end of this year) the rest will go towards saving for next years tuition. Thank you very much for your response, it means a lot to have some insight, especially being so young at this.

[Laura33]

Is the 9% loan a private loan?  If so, the most important thing you can do is pay off that debt ASAP.  The reason is that even if you are not required to make payments on private loans while you are still in school, that loan is still accruing interest, so if you wait until you graduate to pay it off, you will owe a lot more.  I would rather you take out another 6.5% loan next year than keep paying 9% interest on your current loan.

But you are right to be focused on the long term - and long-term, your success hinges on getting that degree and getting a good job.  So do what you need to to get that back on track.  Sounds like you have a plan for that - but if that doesn’t work, cut back on the job to give you the time you need to really focus on your studies.  The sooner you can graduate, the sooner you can start earning a bigger paycheck, which will really enable you to sock a lot away.

[redwood_canyon]

Is the 9% loan a private loan?  If so, the most important thing you can do is pay off that debt ASAP.  The reason is that even if you are not required to make payments on private loans while you are still in school, that loan is still accruing interest, so if you wait until you graduate to pay it off, you will owe a lot more.  I would rather you take out another 6.5% loan next year than keep paying 9% interest on your current loan.

But you are right to be focused on the long term - and long-term, your success hinges on getting that degree and getting a good job.  So do what you need to to get that back on track.  Sounds like you have a plan for that - but if that doesn’t work, cut back on the job to give you the time you need to really focus on your studies.  The sooner you can graduate, the sooner you can start earning a bigger paycheck, which will really enable you to sock a lot away.

Yes it is indeed a private loan. I will see if I can pay it off this year approximate cost at the end of the year with interest is ~2.6k so that would be very doable with a part time and summer job. Thank you for your concern! I do really want to stay as positive as possible net worth wise, and it seems being proactive paying for school myself through work is the best option. I agree with your statement about graduation, however I wont allow myself to justify expensive loans with future income possibilities, at least if I can do something proactive such as work. And if I can keep my grades up while doing so. (Of course that statement applies to an extent)

Thank you for your input!

-Nathan Gay

[Radagast]

I did not learn about the FIRE way of life until I was 30, and I don't really regret it. If you need to work in a cubicle for a decade of your life I don't vote the 20s as the best decade for that. The broader point is, yes absolutely get a summer job and stay out of debt. I did that and saved a few extra thousand beside, and as soon as I graduated it allowed me to take a few extra years off to travel the planet, followed by a couple years of working with hobbies.

With hindsight, I could have been employed and investing throughout the 2008 crises which it looks like would have given me $800,000 or more right now. Do I wish I had kept my head down and worked and scrimped my 20's away? Honestly not really, it seems like the 30s and 40s are more suited for that. So definitely kill debt, and save money. But also live.

BTW UNR grad too. 10 years ago.

[Linea_Norway]

As a student your most important job is to graduate fast and get a relevant job fast, while building up as little debt as possible. And in your case, pay of that high interest debt. Find out if you qualify for scholarships or other subsidies of any kind.

Keep your expenses as low as you can. Live with your parents if necessary, or live with a roommate. Don't own a car if you can walk or bike to university. Make your own meals from cheap ingredients. Don't spend all your money on beer. Buy your books second hand. Etcetera...

Investing is something you can start with when you have a job and an income. And even then. In your first years you are usually building up a household which is where most of your money goes, as well as building up your emergency fund.

[Car Jack]

You have already found that you'll be able to do some courses at a community college during the summer.  Here's an idea.  After the summer, go to part time at your college and then take transferable courses at the community college.  My son is doing that right now (both community and state college) while part time at his big name, big dollar college.  When he graduates, it will be from the big name college.  Nobody cares where you took economics or English comp when you're an engineer.  My son's a senior, so it's not like there are only entry courses at community and state colleges.

[redwood_canyon]

Thank you for the insight @Radagast ,

I really want to spend my 20's well, probably in a very Mustachian and Stoic way, enjoying life outdoors and many adventures. It is quite awesome that you are from UNR!!! I am absolutely loving it here studying Material Science and Engineering. It good to know what your experience was like and have some insight. I plan on being really thrifty and efficient in my 20's, an will make sure I don't end up working too hard.Thanks again!

[redwood_canyon]

You have already found that you'll be able to do some courses at a community college during the summer.  Here's an idea.  After the summer, go to part time at your college and then take transferable courses at the community college.  My son is doing that right now (both community and state college) while part time at his big name, big dollar college.  When he graduates, it will be from the big name college.  Nobody cares where you took economics or English comp when you're an engineer.  My son's a senior, so it's not like there are only entry courses at community and state colleges.

Thank you for that tip, That would work wonderfully but unfortunately a "scholarship" discount for out of state students requires me to take 30 credits a year from the university. I will see though if something like that would possibly work, since engineering is a high credit major.

[Lady SA]

I graduated from an engineering college in 2014. My biggest pro tips are:

• Focus on getting at least one (paid) internship in your industry during college. This experience will pay off 10X over the course of your career. Do not neglect this! Use the internship to investigate your industry and make sure your growth/skills are lining up with industry expectations. Make adjustments as necessary. And usually an internship will come along with a full-time job offer if you are a good worker, plus suddenly it will make you much more attractive to recruiters from other companies.
• Shop around for your necessary classes. If you can take some community classes and transfer the credit to your institution for much cheaper, do that for a few of your summers as well. TRIPLE CHECK that your credits will transfer otherwise you will be flushing money down the drain. I took a few humanities credits at my local community college for about 1/3 the price.
• Be frugal with your budget, obviously. Do try to minimize the amount of debt you take on, but not to the exclusion of career-building experiences that set you up to find a good, high paying job right out the gate. Your ROI on reducing your debt load by relatively small increments is usually not worth it if there is a negative trade-off with you working so much. As a future high-earner, don't be too scared to debt to the point of being penny-wise and pound-foolish.
• Do some research and look for/target Rotational Programs as your first full-time job. Many industries/companies have them and they are becoming more common; they are essentially for new graduates and you rotate through different areas of the company and gain a lot of experience. Those are really amazing and really help you develop solid professional skills as you are mentored by multiple people in the company and get a wider view of what goes into making the company run. Afterwards, most companies allow you a lot of input into your "final placement".

[caracarn]

It is great that you are focusing on your future at such a young age.  The power of time will do wonders for those dollars you invest now.

With that said, I suggest the same as others, perhaps forgo some of the stache right now to avoid taking on more debt.  I have kids going into college and to give them more than a few choices in colleges even with basic federal loans that still involves coming up with $20K over their college years.  The most recent loan for one of my kids is at 6.5% for a Stafford so your rates do seem high.

[ericrugiero]

Some people like the idea of borrowing more money for college at a low interest rate (especially if the interest doesn't accrue until graduation) so that they can make more money in mutual funds.  Your student loan rates don't sound very good to me.  The 9% loan in particular is to high to play that game.  Even the 6% loan is higher than I would be comfortable with.  Remember, that interest is a GUARANTEED cost.  Historical stock market rates might average higher but that's a long term average.  You could easily lose 10% or more in the stock market (short term) and also pay 6-9% interest on your loans.   Especially with your interest rates I would use all my money to pay for college and then invest after you get out. 

Good job thinking about your future and being committed to investing. 

[mschaus]

I graduated from an engineering college in 2014. My biggest pro tips are:

• Focus on getting at least one (paid) internship in your industry during college. This experience will pay off 10X over the course of your career. Do not neglect this! Use the internship to investigate your industry and make sure your growth/skills are lining up with industry expectations. Make adjustments as necessary. And usually an internship will come along with a full-time job offer if you are a good worker, plus suddenly it will make you much more attractive to recruiters from other companies.
• Shop around for your necessary classes. If you can take some community classes and transfer the credit to your institution for much cheaper, do that for a few of your summers as well. TRIPLE CHECK that your credits will transfer otherwise you will be flushing money down the drain. I took a few humanities credits at my local community college for about 1/3 the price.
• Be frugal with your budget, obviously. Do try to minimize the amount of debt you take on, but not to the exclusion of career-building experiences that set you up to find a good, high paying job right out the gate. Your ROI on reducing your debt load by relatively small increments is usually not worth it if there is a negative trade-off with you working so much. As a future high-earner, don't be too scared to debt to the point of being penny-wise and pound-foolish.
• Do some research and look for/target Rotational Programs as your first full-time job. Many industries/companies have them and they are becoming more common; they are essentially for new graduates and you rotate through different areas of the company and gain a lot of experience. Those are really amazing and really help you develop solid professional skills as you are mentored by multiple people in the company and get a wider view of what goes into making the company run. Afterwards, most companies allow you a lot of input into your "final placement".

MSME engineering manager here, and I'll second this as great advice. If it was me, I'd focus less on "investing" and instead building a cash cushion that would allow me to make moves across the country or take advantage of other unique opportunities (entrepreneurial, career-building, etc). The investment should be in yourself and your earning potential. Takes cash to move towns to get to grad school, too (if you go that route, be sure to get teaching or research assistanceships, which can potentially pay all your costs).

Outside of summer internships/co-ops, I needed all my time to study. If I could go back, I'd look into one of those jobs like sitting at the desk at the library and doing homework while getting paid. I'd google around for ideas like that; lots of awesome college hacks out there.