Yahoo Finance I Paid $1,441 in Interest on My Student Loans: Here’s Why I Don’t Regret It
It’s no secret that student loan debt is a hefty financial burden for many Americans — they have to stress about paying down debt while trying to find a job that pays well enough to keep up with inflation. According to the National Center for Education Statistics, the cost of tuition shot up over 13% from 2011-2021 to 2021-2022, forcing more students to rely on loans to get through their education.
According to data from the Federal Reserve, Americans’ student loan debt reached $1.75 trillion in the first quarter of 2024 after hitting a record high of over $1.77 trillion a year prior. And the College Board reported that 54% of the students in a bachelor’s degree program during the 2020-21 academic year graduated with student loans, with the average amount being $29,100 of education debt.
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And that doesn’t account for interest. With an average interest rate of 6.87% on student loans, you could end up paying thousands on top of what you borrowed.
But going into debt for your education isn’t necessarily a bad thing, as long as you end up with a useful degree and have a plan to pay off your loans. Here’s a look at how much one person paid in interest on his student loans — and why he thinks it’s worth it.
The Amount Spent on Student Loan Interest
Eric Rosenberg, a finance expert and founder of Freelancer Dashboard, took out a $40,000 student loan to work on his MBA program, which cost a total of $90,000.
“Based on my tax records, I paid $296 for interest in 2009, $516 in 2010, $596 in 2011, and $33 in 2012,” shared Rosenberg.” Altogether, Rosenberg spent $1,441 on interest on his student loans over the course of the loan.
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Why He Doesn’t Regret It
Rosenberg said that he doesn’t regret spending the money on education and the interest on the loan. Here’s why the student loans were worth it for him.
The Education Opened Up New Career Opportunities
“While the MBA was very costly, I found it to be well worth the investment,” Rosenberg said. “It led to new career opportunities and a major increase in my annual income, and I estimate that it has paid for itself multiple times over.”
When it comes to upgrading your skills and trying to increase your income, you’ll have to spend money on knowledge. Since education is expensive, you’ll likely have to incur student loans, which will come with interest payments. However, if you perform your due diligence and earn a degree that can help you make more money, you’ll be able to spend a little upfront to bring in much more later.
Earning his degree opened up new career opportunities, eventually leading Rosenberg to make more money and save more. As his knowledge and savings grew, he was eventually able to leave his job to pursue freelance writing due to all of his accumulated experience.
It Forced Him To Be Diligent About His Finances
Acquiring student loan debt pushed Rosenberg to be diligent about his finances, as it forced him to create a financial plan to pay off his loans.
Rosenberg shared, “I diligently paid well over the minimum and put every dollar of my tax refunds and work bonus into the loan, so it would be paid off as quickly as possible.
This process allowed him to become financially disciplined, which helped him out when he decided to leave his job to become a full-time entrepreneur.
How Do You Ensure the Student Debt Is Worth It?
It can be hard to tell, when you’re just starting out, whether your degree will be worth the cost. Rosenberg shared his best advice for determining if the student loan debt is worth it.
Look at Your Possible Income Opportunities
“When deciding if an education is worth the time and financial investment, consider the long-term career prospects and potential income,” said Rosenberg. “For example, while you may enjoy history or the fine arts, majoring in either of those is unlikely to lead to a high-paying career on its own.”
Recent data from the New York Federal Reserve stated that nine of 16 highest-paying college majors were in the engineering field. The median starting annual salary for a liberal arts major was $38,000, while it’s $80,000 for computer engineering. While everyone isn’t meant to work in engineering, you’ll want to balance the amount of debt you take on for your education with your income potential in your field.
Rosenberg added, “Traditionally, degrees in business, engineering and applied sciences are among the best choices for a high income.”
Try To Determine If There Will Be Work in Your Field
You’ll want to do your best to conduct research on career possibilities based on where you live and the specific program that you want to study. The Bureau of Labor Statistics offers extensive data on career prospects for many different fields, so it’s a good place to start.
While there’s no guarantee you’ll find a job straight out of college, you can increase your chances by analyzing your prospects in advance, so you don’t feel stuck when you finish your program and can’t find work. The amount you spend on student loans — including interest payments — should make sense when looking at the available employment opportunities.
Tips for Paying Down Student Loans
If you want to reduce the amount you spend on student loan interest, you’ll have to get serious about paying down this debt. Here are some tips that will help you get started.
Start Making Payments Immediately
“I started making payments while still in school to get ahead and save in interest for the long-term,” said Rosenberg. “My final payment was exactly two years and six days after graduation.”
Rosenberg didn’t wait until he landed his first job in his field to make a payment on his student loans. He used whatever income he had to make a dent in his debt the moment he could. By making payments immediately, you’ll reduce the amount you spend on interest for your loans.
Find a Debt Repayment Plan
Numerous strategies exist for paying down debt, and it’s crucial that you find one that you can stick to. Some people follow Dave Ramsey’s popular debt snowball plan — paying off your debts in the order of smallest to largest balance — while others, like Rosenberg, use the debt avalanche method.
How does the debt avalanche work? Here’s how Rosenberg summarized it:
“This method involves ordering your debts by interest rate and paying as much as possible into the highest-interest debt. I worked to keep expenses as low as possible and made extra payments on top of my minimum monthly payment.”
This plan worked for Rosenberg’s situation, but it’s important that you review different options, since personal finance is unique to everyone. The goal should be to make a plan and a budget to pay off your student loans, so you can save for retirement and other financial milestones.
Increase Your Payments
Rosenberg knew that he wanted to pay off his student loans so that he wouldn’t spend a fortune on interest, so he decided to increase his payments. You don’t have to follow the payment plan outlined by your lender, as long as you make at least the minimum payment on time — you can pay larger amounts to accelerate the process.
Rosenberg added, “I divided my monthly payments up and made a payment every payday instead of once per month, further accelerating my payoff by adding two extra payments per year. Whenever I had available cash in the bank that could go into the loans, I did so, until each loan was paid off.”
While student loans can be a burden for many years after graduating, the good news is that if you earn a degree in a field that pays well and you create a financial plan, you can pay down your student loans to limit how much you spend on interest.
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