The Cost of an Education

Last week I posted about how I just crossed the six figure mark with my net worth. Out of that post came some comments about my student loans which got me thinking. Everyone’s financial journey through college is different. Some people leave college debt free, while others are less fortunate and might be paying for their education for at least a decade. Below are a few examples of scenarios of people I’ve come across through my collegiate and working years:

  1. Parents had a college fund set up for them from birth, paid cash for whole education. Left college with zero debt.
  2. Lived at home for first two years while attending community college. Transferred to university after two years and maybe took out a couple small loans.
  3. Went to a private school, funded everything themselves. Left college with ~$100k of student loans.
  4. Grew up in single parent household. Grants, financial aid, and scholarships covered everything. Left college with zero debt.
  5. Killed it in high school. Was in all the clubs. Crushed the standardized tests. Scholarships paid for almost everything.

Personally, I was a mixture of many of the scenarios above. Below is a little peak into my pre-college and college years, mostly from an expense standpoint.

High School – I always tried in high school and got good grades. Once junior year rolled around I started enrolling in Advanced Placement and college cooperative courses. By the end of senior year I had over 20 college credit hours completed, all at a cost of less than a thousand bucks total. I also did well on the SAT’s and secured a half tuition scholarship to my state’s university.

College – Grandma and Grandpa covered my first semester freshman year. Aren’t grandparents great?! Loans covered second semester. After freshman year I calculated that I could actually graduate college in three years, if I stuck exactly to a course plan I mapped out. Since I knew I was responsible for a majority of the cost of my education, I figured out it was a no-brainer. Loans covered years two and three (with some help from my parents), and I graduated after my third year. At this point I had taken out approximately $29,000 in loans.

Master’s – A week after I graduated with my Bachelor’s degree I started my Master’s program. The program ran about $20,000 but my employer was footing the bill for half. Therefore I took out $10,000 in new loans to cover the rest of the balance. I worked while obtaining this degree, and it took me just over a year to finish. It was a tough year but I definitely wanted to get it over fast, and I wasn’t going to suspend my career while getting it.

I always had jobs in high school through college and that covered my books, eating out, trips, and of course beer. All said and done I walked away from college in about four years with a bachelor’s and a master’s degree and about $39,000 in student loans (not including interest that had accrued in the meantime).

Overall I think I made out pretty well. $39,000 in loans for two degrees wasn’t too bad, and I knew people who were far worse off. The monthly payments were definitely manageable for me and I was throwing any extra cash I earned at the loans with the highest interest rates as soon as my income started coming in. I even paid them down while they were deferred when I was obtaining my second degree. As you can tell I was not a fan of them and wanted them to disappear fast. Today my balance is below $8,000 and the interest rate is quite low at 3%, so I don’t have as much hate towards them anymore.

My key financial takeaways from my college years are:

  1. Take advantage of classes in high school in which you can earn college credits on the cheap.
  2. Apply to both public and private universities as the financial aid packages and scholarships offered will differ. I only applied to my one state university since it was the only place I wanted to go. I wish I had applied to some private schools as well since with my grades and test scores, I probably could have gotten a healthy financial package comparable or even better than what I received at the state school.
  3. Apply for as many scholarships as possible. I didn’t really take advantage of this, and I really wish I did.
  4. Major in a degree that will get you a decently well paying career right out of college. I’d definitely say go the STEM route or business (i.e. accounting or finance).
  5. Always have a part-time job to help pay for books, food, and fun activities.
  6. Take advantage of your employer and encourage them to help foot the bill of further education.

Sometimes I wish I just went into a trade such as carpentry or electrical, and began earning a decent paycheck at 18 right after high school. But then I think I wouldn’t have the finance and accounting background I have today to enable me to be diligent in my path down the financial independence lane. Also I don’t think I could put a price on the friends I made and my experiences. College was definitely the way to go for me, even after figuring in all the costs.

How did you finance your education? Any tips for people starting to plan their college careers? Was it worth it?

44 thoughts on “The Cost of an Education

  1. Mr. SSC

    I was a mix bag too. I had good grades and honors and did well in sports in highschool all while working the max allowed hours, but I slacked off on the AP classes. College was a waste the first 2 years because they were covered by Pell grants. when I paid for the next 2 semesters out of pocket I dropped out because I realized what a waste of $$ it was for me at that point.
    When I came back, I had loans for undergrad and made a huge financial mistake transferring to an out of state school. It cost $36k for 3 semesters before I could get back to instate status. That ramped up my loans a LOT. Grad school was covered with a stipend, but my poor decisions still cost me ~$20k more in loans.
    I walked out with $64k in loans in total. It’s paid off now, but man I still shake my head at younger me and the idiotic decisions I made.
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    1. Fervent Finance Post author

      Hindsight is 20/20. That $64k has turned into a pretty nice career for yourself, so no need to beat yourself up about it. I just try to share my mistakes, and good decisions, so that the future generations can make better, more informed decisions.

      Reply
  2. Andrew@LivingRichCheaply

    I’m glad I went to a state university as well…although at the time, I didn’t feel that way. I worked throughout college but it was mainly for spending money. I received some grants, took out a loan, and my parents paid the balance. I graduated with under $20k in loans…this was over 10 years ago though. After a year of working, I went back to law school which was about $26k part time (unfortunately the public law university option did not offer part time back then) and I worked full time so I covered whatever the federal loans didn’t cover. I graduated with another $74K in loans. Luckily my interest rates are very low. I think it was worth it, but I advise others to make sure they think very hard about it before taking on that much student loan debt. Tuition has spiked since I graduated and the employment outlook is getting worse. I’m with you on the STEM majors…I was a business mgmt/poly sci major but I think accounting/finance are more useful. Plus, my school isn’t know for their business program.
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    1. Fervent Finance Post author

      State universities are the way to go! I didn’t know you had a law degree – learn something new everyday. If I could go back I probably would have tried to do engineering / business dual major. Would have taken longer than 3 years though for me.

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  3. Ali @ Anything You Want

    You make a great point about taking classes in high school (for free!) that can help lessen the time it takes to complete college. The same goes for college/grad school. I got my MBA recently and there were many classes I could have passed out of (and therefore not paid for) if I had taken them in college. It would have required a lot more foresight, but would have paid off in a big way. Oh well, live and learn!
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    1. Fervent Finance Post author

      Live and learn is right. I’m just happy I was a nerd in high school and took advantage of all those AP/college co-op classes. 🙂

      Reply
  4. Brian @DebtDiscipline

    I never went away to college, stayed local and lived at home. My parents cash flowed my college and I worked during the summer. I’m incredible thankful for my parents for this gift. My son is taking 5 AP classes in his junior year of HS. We are hoping this springboards some credits for him. We are going to hit the scholarships hard. Did someone say free money?
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    1. Fervent Finance Post author

      Wow – great financial decision for sure! Good for your son, he’ll definitely pat himself on the back later in life. I wish I hit the scholarships hard – free money is awesome!

      Reply
  5. Tawcan

    I was lucky that my parents paid for my university cost. I was double lucky that the tuition was relatively low compared to when I graduated as the school started raising its tuition cost. Having said that, I was frugal during my university days and kept my spending to a minimum. Getting high school scholarship when I graduated and getting university scholarship throughout my university career also helped.
    Tawcan recently posted…Dividend Income – July 2015 updateMy Profile

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    1. Fervent Finance Post author

      Nice, that definitely set you up nicely for when you started on your FI path. I wasn’t very cost conscious in my younger years. But at least I figured this out in my mid-twenties and not mid-forties 🙂

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  6. Chef @ Fry The Financial Fish

    With the rising cost of tuition, the level of debt you accumulate is largely proportionate to the year of graduation. Back in 2002 my total cost of tuition was ~80K-100 for 4years. If I was to attend college today I would be looking at least double/triple this amount.

    The breakdown of my college contributions:

    Working 20-30hrs/wk, I paid my own living, expenses, books and 1/4 tuition – (1/4)
    Scholarships (1/4)
    Parents covered (1/4)
    Student loans- – Balance (1/4)

    With the high cost of tuition now, if I had to go to college I would likely have spent a lot more time evaluating the value of a degree vs sunk cost. I likely would have taken the community college transfer route and live at home to save money. My kids are a long way off from going to college- we are already investing in 529 for them.

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    1. Fervent Finance Post author

      Chef – pleasure to meet you on the interwebs. I can tell you’re a great parent by funding those 529’s. Financially I should have definitely gone the community college transfer route, but I had so much fun living on campus and getting into trouble 🙂

      Reply
  7. Mr. Enchumbao

    I saved money going to college by going through a preparatory enrollment program. That took care of the cost for the first 2 years (living on campus) and part of the 3rd year. I always tell people to search for scholarships. Sometimes you get them just by applying. It was definitely worth it. I probably wouldn’t have the job that I have today if I didn’t have a BS degree.
    Mr. Enchumbao recently posted…My Life After Paying Off $53,392 in Debt in 3 YearsMy Profile

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    1. Fervent Finance Post author

      That definitely sounds like a good deal! I wish I tried harder with the scholarships for sure.

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  8. Abigail @ipickuppennies

    I went to college for a little over 4 years and came away with about $34k in debt. (My parents covered rent; I covered tuition.)

    My parents had been making me save throughout my childhood: half of all babysitting/holiday/birthday money and all but $20 of my paychecks. Of course, 14 years of the Alaska Permanent Fund Dividend helped.

    Point being, I had the money. We just kept it in the bank during college since my loans didn’t start earning interest until 6 months after I stopped school.
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  9. Our Next Life

    Nice job graduating in 3 years! We’d add — look at colleges in inexpensive places. By far my most expensive part of college was just paying rent in the pricy town where I went to school. My tuition, fees, books, etc., were all covered (thanks, high school me, for earning that full ride!), and even part of my rent was covered by the scholarship, but just the high cost of living took a major toll. So my advice is to try to look at colleges in less expensive places, because my $10K in student loans were all taken out to cover groceries!
    Our Next Life recently posted…Goals, Reality and Quirks // Our Asset AllocationMy Profile

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    1. Fervent Finance Post author

      Wow good work on the full-ride! I definitely could have done better lowering my living expenses, but I wasn’t as frugal as I am now.

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    1. Fervent Finance Post author

      I definitely was interested in personal finance when I was a teenager. I started investing on my own once I turned 18, and also opened a credit card to build credit. I wasn’t as frugal since I was planning on the normal work 30+ year career trajectory. I just wish I knew about some of the great blogs that may have existed back then about personal finance that would have set me on the right path.

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        1. Fervent Finance Post author

          Yeah I hear ya there. I wish I took entrepreneurship seriously in college. So much free time and smart friends with free time. Could have invented Snapchat! 🙂

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    1. Fervent Finance Post author

      Did you notice I was talking about you in #5? 🙂 I could have done it a little better financially, but hey – live and learn.

      Reply
    1. Fervent Finance Post author

      Great job paying off the debt a few years ago. I agree about the picking a degree with a high ROI at a state school. Has worked for me so far!

      Reply
  10. Harmony @ CreatingMyKaleidoscope

    At least you didn’t take out loans to pay for beer in college 🙂 If I could go back, I would take out less money for “living expenses” and use the loans only for tuition and housing. While I also always had a job or two during college, I would probably have been more frugal without the extra money.

    My loans are approximately $55,000 for undergraduate and graduate school. This is one of the reasons that I can’t bring myself to leave my occupation just yet. I need to use my degrees for the higher rates of pay and obtain a return on my “investment.”
    Harmony @ CreatingMyKaleidoscope recently posted…3 Ingredient, Quick & Easy “Cabin Chicken”My Profile

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    1. Fervent Finance Post author

      Thanks for stopping by Harmony. What occupation are you in? And what have you thought about moving into?

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  11. Jason @ Islands of Investing

    I ended up with a similar amount of debt, which was effectively government loans that were automatically paid off from my salary at varying rates as my salary increased. Never really noticed it because I never even saw the payments! But the final payment came out a couple of years ago, and it was great to see a nice little take-home-pay increase after that! 🙂
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    1. Fervent Finance Post author

      I bet the feeling is nice once they’re gone. I’ll be there soon enough! Congrats on paying them off.

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  12. Steve @ ThinkSaveRetire

    Fair warning: If you are a proponent of education in this country, then you’re probably not going to like this comment. 🙂

    I was a horrible student when I was younger. I got good enough grades in high school, but I just flat didn’t care. Not a wit. I’ve always found education to be one of those necessary evils, but does very, very little to prepare you for the real world. I went to college because that’s what I needed to do (or so I thought) to get my foot in the door, but I took the easiest degree and the easiest classes and skated through doing the absolute minimal amount of work while trying to maximize the reward. It was the economist in me pulling the strings.

    Everybody’s situation is different, but throughout my working life, I have grown fairly skeptical of expensive education at so-called prestigious universities. I’ve worked with so many people from all different walks of life – student loans and no student loans, barely graduated high school to full blown PhDs, certifications, honors, awards, etc, etc. To be perfectly honestly, I really didn’t notice much of a difference between them. If anything, those with higher degrees felt *more entitled* than those with “lesser” degrees, which always makes the working relationship a bit tougher to manage.

    Don’t get me wrong – I’ve worked with some incredibly sharp people, but their education didn’t seem to matter. Sometimes they had PhDs. Other times, just a bachelors.

    I quit my masters program a few years ago because I couldn’t take it any longer. The cost was outrageous and the reward that I felt was incredibly small – and I was going to a school with the #4 program in the country for Management Information Systems. It was supposed to be a good school. It was a highly rated program. All signs pointed to “Yes” with this one.

    But for me, school is a joke. I’m 34 years old and make more money than I ever thought possible, and I skated by doing the absolute minimum all through school and only hold the lowest level degree possible – a bachelors. And I realized something over the years…

    Education doesn’t make you successful. YOU make you successful, through drive and determination. Nothing about my educational background actually prepared me for full time professional working life. We learn as we go. We get good at what we do. We develop a solid work ethic and start to learn the reality of the professional working world, how to get ahead and the techniques that actually make you successful in life.

    School doesn’t teach you that – at least it didn’t in my case.

    I guess I’m rambling a bit here, so I will wind this comment down. My education was absolutely not worth it in my humble opinion. I realize that I needed that degree to get my foot in the door at the first “professional” organization that employed me. But honestly, it was still a high price to pay for what I actually got out of it.

    Education in this country just doesn’t impress me.

    Everybody’s mileage varies, so I fully realize that my experience will not match everyone’s. But from my point of view, it was a complete waste of my time, money and life during those years that I went to class.

    …but you know, your foot. And that door. Gotta get in that!
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    1. Fervent Finance Post author

      Believe me man – I hear ya. The thing my education allowed me to do is get my first job and my CPA. Everything since then has been my work ethic, work experience, and personality. But in the end, I have to look back and think I’d probably be far from where I am today if I never went to college and got that first job that required the degree.

      I sometimes wish I didn’t go to college and started earning a decent salary at 18 years old in a trade, but then I wouldn’t have the knowledge of finance I do today. I probably wouldn’t have stumbled upon FI/RE, but who knows maybe I would have. But I try not to dwell on it. Live and learn!

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      1. Fervent Finance Post author

        It just stinks that all those years and money have to be spent to get your foot in the door in a lot of cases.

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  13. Amber Tree

    One of the good things about living in Belgium is that the basic higher education is not so expensive as in the US. Most people in Belgium get out of university with student loans, as their parents are capable of paying for the education and housing. What a luxury!

    For my further education, I was lucky to have my parents pay me back the money I paid them for living one year with them while I was working.
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  14. Vivianne

    I was the one “killing it in high school”. I graduated top of my class. I only joined a few clubs and played one sport (golf, no one would play it, so I knew I’d play varsity, benching is not my thing :)). I got full scholarship my undergrad years, then I took out $100k loan during my 4 years of grad school.

    It see college education as an investment. It was well worth it. My friend who had an 6 years advantage, working for costco and got paid $16/hr at the time (now, probably in the mid $20s). Making “a lot” of money young, she blew most of it. I was only making $5.25 or so on my first job. Anyhow, different stroke for different folks. My brother didn’t bother to go to college, he has double what I have.

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    1. Fervent Finance Post author

      Great job Vivianne! College is definitely not the deciding factor to how you will end up financially. I know many people who bypassed high school and went into entrepreneurship or went the blue collar route and have great jobs in unions who do very well. The deciding factor is if you make decent money, do you have the knowledge/make-up to save and invest it!

      Reply
  15. Jenna L

    Interesting post!

    Universities in the UK have very different funding system. I have been through four years study now and due to being from a low-income, single parent family, almost all of my funding has been through loans, overdraft, grants and bursaries.

    I do worry about the accumulative total of my debts when I leave next year which is why I am starting research into personal finance now.
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    1. Fervent Finance Post author

      That seems similarly structured to the US. Make sure you have a grasp on how big your loans are before you graduate so that you can have a plan in place to pay them off.

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  16. Fred

    I have a similar story to yours – took 9 AP classes and Dual Enrollment in High School, got into my #1 choice school that gave great financial aid, and am currently about to start my junior year of college.

    I agree with all of your key financial takeaways, especially #3. I need to keep applying to more scholarships to make sure I don’t have to take out any loans by the time I graduate!

    Great post.
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    1. Fervent Finance Post author

      Awesome work Fred! It would be a great start to your post-collegiate life to not have any student loans. Thanks for stopping by!

      Reply

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