Regardless, you may be wondering why the heck I'd put myself through any of this. You might say that student loans are supposed to be good debt after all. They're cheap money and are to make an investment in your future. People do it all the time and do just fine. No one says you have to take out loans for the whole thing, but do yourself a favor and relax about the whole money bit so you can really get the most out of a once in a lifetime experience
Most of that is absolutely true. But none of it is absolute fact. While student loans are considered "good" debt, they're also the hardest type of debt to get rid of, following you even through bankruptcy. Student loans are for life and maybe even beyond if you have cosigners. They also aren't particularly cheap right now. Though I've yet to look at private loans, students are generally advised to look at Federal first and those are fixed at 6.8% and 7.9% at the moment. Federal student loan rates have not really followed the market down and aren't really cheap money in this economy. Jumbo mortgages can be had for less interest and fees. I've also previously discussed the cost of student loans - by paying for the degree with loans I'd pay for it at least one and a half times.
I'm also concerned with the risk of overburdening myself with debt, banking on a job search two years from now in an economy that may still be sluggish. There has been plenty of news coverage recently of students graduating from programs with six-figure debt but unable to find a job. I know someone who graduated from my school of choice and nearly a year after graduation still hasn't started work, though she did finally secure a position. Though I don't know the specifics of her financial situation, I imagine having a typical debt load would be extremely stressful during that year of searching. Sure student loans can go into deferment for a number of reasons but the vast majority of student loans will accrue interest during that time. If you graduate with a "typical" debt of $87,000 then the first year of deferment at 6.8% is nearly $6,000. At 7.9% it costs you $7,000. The interest compounds - imagine the magic of compound interest working against you.
So really I guess what it boils down to is that I'm concerned about risk. Risk that the job market might not be so hot when I graduate, risk that my new shiny MBA degree might not do the career magic that $165,000 price tag implies, risk that I won't be able to pay my loans, risk that I won't want to take a job where I can pay my student loans. I also would like to be able to work for motivations other than money in my career and have freedom to pursue my own interests and projects or start a business eventually. All of these worries lead me to think that minimizing my student loan debt would be a really worthwhile investment for me. But while I was thinking about this I had the small epiphany that I could just try not to have any debt at all. I mean, who knows? Graduating with debt may be an entirely doable proposition, but I would never know unless I tried. By setting a really challenging goal for myself I think I'm more likely to succeed at my base goal of reducing risk and increasing freedom through minimizing debt. Plus not having a single student loan repayment bill show up one month after graduation would be a really sweet graduation present to myself.
I'm not against debt in and of itself. I do believe in leveraging debt in some situations, though I never have. But I also believe that student loans, especially once they exceed $25,000, would be a significant hindrance to my career, freedom and choices. I also know that without this goal I would still worry and be anxious about my financial situation and any student loans I took out. If anything I hope this route is less stressful because I'm meeting my fears head on and doing my best to address them.
What do you think about my goal?