[Anonymous]

Not 100% sure this topic is right for this forum – but let me lay it out.

As aspiring, or already CPAs, we are required to get an education. Many of us even have more than 4 years, whether due to career changes or state mandated minimum education requirements to become licensed. Based on this, as well as how expensive an education is nowadays, it is a good bet that most of you, like me, have a negative net worth due to a large amount of debt.

Although partly myth – but mostly true in my experience – accountants are conservative, goal-oriented and can be frugal when they set their minds to it.

So, how did, or do, you deal with your student loans?

I am around two years out of school with around student loan debt in the $30’s. I am on a long payment plan (I think it is 25 years – I should know this!) and have a minimum payment of around 240/month – although I pay closer to $400/month. I recently moved to a nicer area closer to where I work (much more expensive), and purchased a really nice La-Z-Boy couch and am thinking of getting a big screen TV. BUT, I’ve started to feel guilty. Am I being irresponsible? Should I be living more frugally and try to triple my payments?

If I was smart, I’d live in a less convenient area and with roommates (likely chopping my rent in half but also adding to my commute). I’d stop buying shit that I don’t need (my little tv that I bought when I was 14 still works great – only 1 trip a year out of town to see my family would suffice). If I were smart, I’d live super frugally for the next 10 years of my life and put any salary increases towards my loan balance. But then again, I want to live, am easily able to pay all of my bills and save a little each month, and tend to think of student loan debt as good debt (vs. credit card debt, which I pay off completely every month). So although I do feel a little guilty, I’m not convinced I’m doing things wrong. Am I?

I am also curious on how you managed your debt after college.

[Mamabear]

Everyone's situation is different. Some people can go to college on scholarships without student loans and some people can't because of choices they made early on, circumstances, what they saw growing up, etc. It's great that some people can graduate college without debt, but it's unrealistic to say everyone can go to college without taking out loans. I was fortunate to have parents that paid for my education until I decided that partying was more important than attending class. Once they stopped paying I started working a real job (8-5 receptionist as opposed to the retail/waitress jobs I had in high school and college) and it didn't take long for me to realize that I didn't want to say “Thank you for calling CIGNA. How may I direct your call?” for the rest of my life. I hopped on board the employer reimbursement plan and finished two years of school in 1 year working during the day, going to class 4 nights a week and on Saturdays. I went to graduate school while my fiance worked. It's amazing how quickly you can learn to appreciate something when it's no longer offered. If I had it to do over again I would have never abused the priveledge of having parents that could afford to pay for my education. I made things so much harder on myself, but that's my point. Not everyone makes the best choices from the start and it's easy to judge because of your own experiences, but it doesn't change the fact that most college kids are just that…kids. I may have had my education paid for, but I still took student loans to go on a study abroad to Australia during my MBA program and I don't regret it one bit. It was an opportunity that came up unexpectantly and didn't afford me the chance to raise the funds prior to departure. That was a choice. The original poster's question is not whether or not to take out student loans. That decision has already been made. It's whether or not to put everything into paying it off or live some and extend the payments. There has been good advice about rate of return versus interest to pay, but coming from someone that accumulated a lot of credit card debt as an adult (wedding, honeymoon, new house, kids) in just a few of years I don't believe that any kind of long term debt is a good thing. While 25 years at a low interest rate may sound appealing it's just one more thing hanging over your head when you have more choices to make in the future. Right now it's just a big screen or an apartment, but eventually it's going to be “should we pay off debt before we get married” or “should we pay off debt before we have a child”. The choices get tougher and tougher as you go along. After child #2 we buckled down and lived on a $30/week budget each aside from groceries ($90/week for a family of 4) and gas. This meant everything had to come out of that $30–birthday presents, Christmas presents, extra groceries for holiday get togethers, eating out, little suprises for the kids. It was hard, but we paid off $30K of debt in a little under 2 years and had another child during that time by being as strict as we could possibly be. It's not an ideal situation, but it's certainly doable if you just think about the fact that the quicker you get out from owing anything the quicker you can get the things you want without having to choose between debt and other things. Sorry for the dissertation.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[Anonymous]

I started this post yesterday and never posted it…haven't read all the discussion since but still wanted to contribute…

I incurred $5500 of student debt my 1st year of college, then switched colleges, took a semester off school, paid back the loans, and went loan-free the rest of the way. I had just shy of 1 year of college free because my dad worked at the college; other than that, the only thing I had handed to me was $1900 of Pell grant (total) and $1200 from my parents my first year. I was lucky to find some super-cheap yet accredited options to do most of my degree.

However, I now have a car loan and a home mortgage. 🙁 But am definitely in the “live frugally and pay it all off” crowd. I'm not very religious, but do identify a lot with the Proverb that says “the borrower is servant to the lender”. The fact that losing my job could make me lose my house and my car makes me much less of a free agent with my job – it adds a large degree of risk to doing things like changing jobs. So, I expect to stay in my low-level accounting job at least until my house is paid off (about a year to 18 months away), probably till my car is paid off (another year), cause even though I could get another job I could also discover 2 weeks into the job that the new boss and I really can't work together, and 2 weeks later be jobless. So, in a way, my debt makes me a “slave” to my job. Thankfully my job is good (except for being low-level work), but my debt still makes me tied down more than I would be otherwise. So, my debate tonight has been how to swing an unexpected $68 food bill due to a change of diet for a family member after a doctor's visit with not-the-best news. I could cut down the extra I'm paying on my loans to cover it, but I don't want to do that…so instead, I'll come up with an excuse not to get frozen yogurt with my coworkers from the place next door cause $3 for those calories is more than I need to spend. But…this is the choice I make. Debt weighs on me enough that the negative value on my life is greater than the positive value of spending money. For others, they are able to accept the debt that they have and not worry about spending money, and that probably makes their lives happier.

One thing I try to think of to help me be motivated to pay off debt is “Would I buy this on credit?” I don't think that way for basic budgeted necessities, but for bigger things I do…cause if you have loans and make a big purchase, then you're essentially increasing the amount of debt you remain under by buying that. So, $1000 couch – would you buy it on credit? If so, then go for it. If you wouldn't take out a loan for it, then think twice.

Another thing to do is look at what additional interest you will pay and add that to the cost. I have amortization tables set up for my house and car so that if I'm looking at a $1000 couch, I can plug in a $1000 additional principal payment and see the interest difference between buying the couch and not by the time the loan is paid off. So, say the interest difference would be $300 by the 25-year loan expiration. Is the couch worth $1300 to you? If so, go for it; if not, think twice.

EDIT: Just read Mommybear's post, and wanted to say that I think her last sentence or two are really where it's at – choosing whether to live it rougher now in order to live better later or not. My dad's a big Dave Ramsey fan, and I know he's been all over this thread…but I think the way he says it is “Live like no one else now (depriving yourself) so you can live like no one else later (living high on the hog while they still struggle with debt payments)”. It's cost-benefit analysis. Is it worth it to you now to skimp so that you can have a better retirement and/or have an easier time in a few years? Everyone will decide that differently, but that's what it comes down to.

[kiester]

I had to skim through a few of these posts (s/b studying!), but I have to give a shout out to Dave Ramsey. I also drank the juice! In 13 months my husband and I paid off 30k in credit cards and we are hoping to knock down the remainder of my 35k in student loans by early 2015. We make under 100k a year combined. It’s hard, but so worth it. In a weird way it’s kind of like studying for the CPA exam, sacrifices now for future riches:)

AUD (10/14) 62 (2/16) 83
BEC
FAR (8/14)71 (1/24/15)77
REG (5/14) 69

[MrCPA2B]

I'm curious about this as well! For the more experienced professionals, do you know if having student loan debt could affect your chances of becoming employed? I have $55k with my bachelors and masters and wanted to know how HR would view me when hiring if they saw that i had that amount of SLD.

AUD- FEB 2014
BEC- APR 2014
FAR- MAY 2014
REG- AUG 2014

Using Wiley CPA Exam Review and Ninja Notes
May the "Force" be with me!

[Tncincy]

How do accountant deal with student loans? Real simple Pay them Back as quickly as possible. Otherwise they will become an annoying pest to a descent life style.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Anonymous]

It's just like accountants to argue over student loans…SMH…

We should a) be studying or b) have more interesting things to do with our time now that we've passed the exams…

So everybody in this thread needs to make like Donald Sterling at a Black Panther party and get the heck outta here!

…even you Jeff…don't you have some NINJA study materials to give away or something 😉

[jeff]

I do pro bono financial counseling and have taught several Financial Peace University (Dave Ramsey's core curriculum) classes. It's a topic I'm pretty passionate about, actually.

[UHC2005]

I'm on the Dave train for most things. I don't necessarily agree as far as credit cards go, but we only have one that we use currently. My wife and I used Dave methods to not only pay down close to $13k in credit card debt, but we also managed to pay for our wedding completely in cash (only ~$10k).

As far as recommending being an engineer, not everyone is cut out for that, me included. My major was Chem Eng for a year and a half before I realized it wasn't for me (The D in Organic Chemistry and the F in Calculus III sped the decision along). I moved to Economics and then found accounting, which I love.

Using Ninja MCQ, NINJA Notes, Audio, Flashcards and BLITZ, and 2014 Wiley Text

FAR - (61,63)
AUD - (68)

Keep Calm and RTMFQ

Accountant, what is best in life? To crush your MCQs, see them driven before you, and hear the lamentation of their SIMS!

[jeff]

^ I haven't owned a credit card in seven years. It can be done 🙂

[UHC2005]

I hear you, we're not quite as Murphy repellent as we'd like to be a the moment, but that is definitely a future goal for us. 🙂

Using Ninja MCQ, NINJA Notes, Audio, Flashcards and BLITZ, and 2014 Wiley Text

FAR - (61,63)
AUD - (68)

Keep Calm and RTMFQ

Accountant, what is best in life? To crush your MCQs, see them driven before you, and hear the lamentation of their SIMS!

[Anonymous]

@MrCPA2B – I had about the same about of SLD when I started my full-time job. No one asked about it. The amount of debt you have has no bearing on whether or not you're a good employee – especially when that debt was used to get the degree(s) required for your job.

[Kelestrel]

My husband and I were told by a financial advisor to keep my student loans for a few years, to build up credit. The only other debt we have is a credit card, which we use to track certain expenses and pay off completely each month, and his student debt he's building in school right now.

I don't know much about credit, but I suspect we were advised to do this because 1) the interest rate is low 2) we have no other long term debt we're paying on to build credit and 3) we're young so we don't have much credit history.

REG Aug 16, 2014
FAR Oct 04, 2014
AUD Feb 15
BEC May 15

[Study Monk]

@ Kelestrel,

Your financial advisor gave you good advice. Showing a history of paying off revolving and installment debt can improve your credit and ultimately get you the lowest mortgage rate possible. Unless this is a sham created by the financial industry?

I spoke to an ancient wise man who sent me on a mushroom induced journey through an ancient forest to find the key to passing the CPA exam. A talking spider monkey told me to throw the last of my drinking water in the dirt to find what I was looking for. So I followed his instructions and the following message appeared in the soil:

"Do 5000 multiple choice questions for each section"

[fuzyfro89]

^A financial advisor told you to NOT pay off debt to build your credit? Genius… (sarcasm)

Your credit score is irrelevant (assuming you're trying to get a loan), because they do their own underwriting which is based on your perceived ability to repay the loan (considers more than just an arbitrary number from the credit agencies).

They will review your finances to determine if you can handle the loan based on your income/other debt payments, and payment history (did you default on something recently?). That's basically it.

[Anonymous]

I've gotta get my two cents in on this one. About three years ago, we found out that we were having our second child. We were not intending to have another child and my income was about $20,000/year. My wife worked but did not earn enough to make it logical to send the kids to daycare so she became a stay at home Mom. At this point, I had a decision to make. Either find a way to earn more, or scrape by in poverty for the rest of our lives. I already had an associates in accounting and a good credit history so I took the plunge. I went to school full time with a commute of over an hour each way. I didn't work for the 5 semesters that it took me to finish and amassed about 65K in loans. I could have worked part time but for me the trade off just didn't make sense. My grades and family would have suffered for 8 or 10 dollars an hour which wouldn't have done much toward paying our bills. Anyway, the point is that I landed a job making well over twice what I could earn without a decent degree. I haven't for one minute regretted going into debt.My investment of 65K is yielding over 30K per year and will likely continue comparable returns for the rest of my life. I struggled, suffered, and worked my butt off to get through and now we made it and we're living the good life. Thank God and the Government for student loans.

[Author]

Replies