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My Experience With Student Loan Consolidation

Written by Brett McKay

This is a sponsored post

Let’s face it. Education costs have gone out the roof. Consequently, most students are forced to take out student loans or receive some other type of financial assistance during college.

I’ve been taking on financial aid since undergrad and overall the experience has been good. Signing up for financial aid is very easy with FAFSA. It takes about 30 minutes of your time. Whenever I did have a question, I was able to quickly find an answer on their webpage or by visiting the financial aid officer at my school.

In addition to student loans, I’ve also received grants from the government and tuition waivers from school. My only beef with government grants is that they don’t give money to graduate students. It’s in the best interest of the country to help doctors, lawyers, and other graduate students pay for their education, especially when such students plan on working in the public sector.

Part of my plan to pay back my student loans is to consolidate them. I’ve already consolidated my undergrad loans with the student loan consolidation program. I went with Nelnet because they sent me the most mail. Another student loan consolidation program is with financialaid.com. Make sure to shop around different companies to find the best student loan consolidation program for you. But make sure to consolidate. It makes paying back much easier and you can often get a reduced rate.

> Brett McKay | 02 Jun 07 | Debt, Personal Finance, Student Loans | Comments (0)

Who Are The Joneses and Why Are We Keeping Up With Them?

Written by Brett McKay


To “keep up with the Joneses” is a common phrase used in America to convey the idea of being as well off (or at least appearing to be as well off) financially as one’s neighbors.

Who are these Joneses and where did this phrase come from?

Come to find out, the phrase “keeping up with the Joneses” originated from an early 20th century comic strip of the same title by Arthur R. “Pop” Momand. The comic started in 1913 and ran for another 28 years. It was eventually adapted into musicals, movies, and eventually a catch phrase.

joneses.jpg

The funny thing about the comic strip “Keeping up With the Joneses” is that the strip isn’t even about the Joneses. In fact the Joneses never made an appearance in the 28 years the strip ran. The main characters in the strip was the McGinises family consisting of Aloysius, the husband; Clarice, the wife; Julie, the daughter; and Belladonna, the housemaid. The Joneses were referred to now and then and the McGinises family tried to keep up with them

Why Are We Keeping Up With The Jonses?

We’ve all experienced keeping up with the Joneses moments at some time in our life. We see the next door neighbor buy a new car or hear from a co-worker who takes his family on trips to Europe every year and immediately we feel the burning desire to do the same. Why? First, we want to appear that we’re in the same socio-economic range as our peers. Second, we feel we deserve it. If a neighbor who sends his kids to same school that I send mine, shops at the same stores as me, and lives in the same are as me can afford to buy new things, then I should be able to as well.

People automatically assume that because their neighbors buy new stuff on a regular basis, their neighbors must be better off financially. In order to keep up appearances with the neighbors, many families take on loads of consumer debt. The reality, though, is that your neighbors are probably buying their stuff on credit trying to keep up with some other Joneses-maybe the Joneses at their church. Quickly, keeping up with the Joneses becomes a vicious cycle of one-up-manship.

But guess what? You don’t have to play the game anymore.

As soon as we realize that the Joneses are buying their stuff off of credit, the ridiculousness of the keeping up with them appears: We go into debt so we can keep up with our neighbors’ debt. If having more debt means my neighbors are better off than me, I’ll let them be better off than me.

Not all of our friends who are living lavish lifestyles are taking on debt to do it. Some people actually make enough money to support their lifestyle without taking on debt. However, we shouldn’t try to keep up with them by going into debt. It’s not worth it. It doesn’t mean we’re less of a person because we can’t have the things they have. It just means we don’t have as much money. The reality is that many of your friends who are well off don’t care if you still drive the car you drove in college or if you don’t wear the latest fashions. If these types of things really are important to your friends, then maybe you should get new friends.

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[tags]Personal finance, frugality, Frugal Law Student, money[/tags]

> Brett McKay | 30 May 07 | Debt, Frugality, Personal Finance | Comment (1)

4 Financial Benefits Of Part Time Law School

Written by Brett McKay

If you’re not sure you can afford law school, look into part time programs. With part-time law school programs, you can continue to work full time and you go to law school at night. Because you’re still working full time, you have some financial advantage over students who are going full time.

  1. You can contribute to retirement. Because you’ll still be earning an income, you can continue to contribute to your retirement account. While not contributing regularly for a few years may seem like not a big deal, the power of compound interest and the market may cause you to lose out on thousands of dollars in your retirement fund.
  2. You still might have access to health insurance. It’s a sad fact, but most students don’t have access to affordable health insurance. When you or a member of your family gets sick or injured, medical bills can set you back financially. Hopefully, with your job you have access to health insurance.
  3. You can take out fewer loans. You can offset the costs of your legal education by working. Instead of having to take out tens of thousands of dollars in loans for living expenses, you only need to borrow what you’ll need to pay for tuition. If you make lots of money, you might be able to get away without taking any loans out.
  4. Flexible entrance requirements. If you didn’t do that well on the LSAT or have a dismal GPA, you might look into to part-time programs. Usually they’re much more lenient in admission standards. If you want to see if law school’s the right thing for you, with out making too much of a commitment in money and time, then a part-time program might be right for you.

What do you all think? Are there any other financial benefits of going to law school part time? Or do you think part time law school will actually hurt you financially? Later this week, I’ll be posting on the financial pitfalls of part time law school, so I’d love to have your input.

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[tags]law school, legal, debt, personal finance[/tags]

> Brett McKay | 24 May 07 | Debt, Education, Saving, law school | Comments (12)

Interview With A Strange Bird About Managing Law School Debt

Written by Brett McKay


Strange Bird is the author of I Am Running With Scissors. While she’s not in law school yet, she’s already contemplating how to leave law school with as little debt as possible. From what I’ve read on her blog, it looks like she’s already doing a great job in mitigating her law school debt.

1. How much student debt have you racked up during undergrad? How much more do you plan on taking on during law school?

I attended a public university for undergrad, and with the help of a big scholarship and some part-time jobs I was able to get my B.A. without any debt. For law school I will again be attending a public institution on a scholarship, so I expect that my debt will be less than most law students’, but not insubstantial. The University of California law schools are almost as pricey as some of the private law schools now.

2. What actions are you taking now to mitigate your law school debt?

There are three major ways I’m working now to mitigate my law school debt. The first was negotiating with the law school on my financial aid package, which will save me at least $25,000. Another is saving what I can now, before I start, to minimize my borrowing in the first year. The third is educating myself and planning accordingly. It’s one thing to know that law school is expensive, and another to know exactly how much extra per month living alone would cost me once my loans are in repayment. I think it’s a matter of establishing priorities.

3. When would you like to pay it off your student loans? How do you plan on reaching your goal?
I hope to pay off my loans within five years of graduating law school, which I wrote about here. I would have to adjust my goals if I were to take a public interest job or work for a year or two as a judicial clerk, but assuming I were to work at a typical large law firm right away in my hometown, it wouldn’t be impossible. That is, of course, provided I am able to resist the temptation of expanding my lifestyle to match my salary and diligently pay my loans instead of splurging because “I deserve it.” I would deserve it! But that’s not a good enough reason to blow the bank when I have other goals I want to meet.

4. What other personal financial goals have you set for yourself?
Aside from paying off all student loans by 2015, I expect to also be able to buy a home within five years of graduating. My other goals are a bit softer–saving 10-15% for retirement, living below my means, and retiring early enough to enjoy the fruits of my labor!

5. What is your weakness in regards to your personal finances and how do you think you can improve it?

I think I have a few big weaknesses in regards to personal finances. I’m a bit of a hoarder. It feels really reassuring to have a lot of money sitting in the bank (in a higher-yield online savings account, but still!), but I know that’s not the best way to make it work for me, because I neither can spend it to enjoy it, nor can I invest it properly. I’m also a little bit of a control freak, which makes the idea of investing money (where I can’t control what will happen to it) seem really daunting. I think the only way to get past this is to become more informed. The more I learn about personal finance and investing, the less intimidating it seems, and hopefully at some point I’ll reach the threshold where I no longer feel like stuffing cash under my mattress (figuratively speaking, of course).

6. How do you manage your finances? Is there a particular software you use to keep track of your money?

I use Quicken for the budget and expense tracking features. When I see that I’ve spent 50% of my budget for eating out for the month and it’s only the 8th, I get back on track really quickly. It keeps me a lot more honest than just watching the balance on my account fall. I don’t necessarily recommend that everyone run out and buy Quicken, though–I could just as easily do this with Excel, but a trial version was installed on my computer when I bought it in 2002. I don’t even know what features I can’t access, but I don’t seem to miss them.

7. What do you think is the biggest money mistake or misconception a future law student make?

Since I’m still only a future law student myself, it’s hard to say–I may be making that biggest mistake!–but I’m pretty sure the most dangerous trap to fall into is not really considering the costs of attending law school and living expenses before signing the promissory notes. For example, at my law school, the Loan Repayment Assistance Program will only cover $60,000 of your loans, but the total cost of attendance is closer to $150,000. If someone plans to become a public defender after graduating from a UC law school, she will have to come up with some creative ways to finance her education in order not to be overly burdened by the debt (and live frugally, besides!). Even someone making a salary of $100,000 or more per year will have to make some sacrifices in order to pay back that kind of debt. So it makes sense to be aware, and not live like you’re earning the money instead of borrowing it, because everything you buy will cost that plus 6.8-8.5% (or more!) interest afterwards. Most things won’t be worth it, in retrospect, so forget retrospect and just don’t buy it.

8. Do you have any suggestions to other future law students regarding their personal finances?

KNOW WHAT YOU ARE GETTING YOURSELF INTO. Whatever is motivating you to go to law school, you should be aware of the financial consequences, because they are not inconsequential. People will tell you that a law degree will pay itself off, but it won’t–YOU will pay it off. Make sure that you know exactly how much it will cost, how you will pay for it, and if you are willing to make the sacrifice.

Thanks, Strange Bird, for that awesome interview! Stop by Strange Bird’s blog, I Am Running With Scissors, today to read some of her great content on saving money on law school before you start law school.

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[tags]law school, debt, saving, money[/tags]

> Brett McKay | 23 May 07 | Debt, Interview, Saving, Uncategorized | Comments (0)

Interview With Laws of Finance About Managing Law School Debt

Written by Brett McKay


Laws of Finance is a blog is run by a law student “trying to navigate his way through school without declaring bankruptcy.” With a goal like that, I had to interview him.

1. How much student debt have you racked up during undergrad and law school?

Currently, I have around $84,000 in student loans. By the end my final year of law school, I expect to have roughly $102,500. A fair portion of that is in the form of government subsidized loans, which means that there is no interest while I am still in school. For the loan amounts and rates, see my most recent quarterly statement of financial assets (available at: http://lawsoffinance.blogspot.com/2007/04/quarterly-statement-of-financial-assets.html).

2. What action or habit do you think saved you the most money while in law school?

Frugality, generally. I am not one of those students who goes out drinking and running up $200 bar tabs every night. I buy used books when available and I look around for the best deals online before buying any books from a brick and mortar store. I also look for ways to get the most money for my own used books at the end of each semester. Those little things add up over time.

3. If you have student loan debt, when would you like to pay it off? How do you plan on reaching your goal?

I have a timetable arranged for repaying my loans. The high interest loans (6.8%) will be paid off first out of law school. I have already created a budget with my expected salary and repaying approximately $1,000 per month fits fairly well into that budget. I will make the minimum payments on the other loans until the higher interest loans are paid off. Then I will move on to paying down the lower interest loans. That said, I expect to keep my 4.25% loan around for as long as possible. At least at present, I expect that I will be able to do better by investing that money that I could use to pay off the 4.25% loan.

4. What other personal financial goals have you set for yourself?

Unlike many other people, my goal is not to be debt free. I intend to use debt financing where it benefits me. As long as my cost of capital is low and my investment prospects are higher, I intend to take on debt. My goal is not to incur any “bad” debt, such as high interest credit card debt. In that area, my goal is to go my entire life without carrying a balance on any credit card. I am doing well so far

5. What is your weakness in regards to your personal finances and how do you think you can improve it?

My weakness is a recent change in my frugal nature. I have always been frugal / miserly / CHEAP. Recently, though, that has changed and I have started to spend more freely. It is just this past year that I have really noticed the change. It came right after I secured summer employment with law firms for two consecutive summers. I rationalize it by telling myself that it is the normal by-product of more certain future income prospects. It is not a terrible thing, though, because I know I could tone down my unnecessary spending if my income situation changes. That said, I would still like to keep it in check. I may end up hating law firm life and want out fairly quickly. If that is the case, I will wish I had saved more and spent less with that temporarily increased income.

6. How do you manage your finances? Is there a particular software you use to keep track of your money?

I don’t use any special software. I use Excel spreadsheets that I created myself the calculate returns and totals. I keep track of everything with my spreadsheets. It allows me to keep a handle on all that is happening in my financial life. Once I have calculated everything myself, I publish the results on my blog, Laws of Finance (http://lawsoffinance.blogspot.com/), as well as on NetWorthIQ, which can be accessed from Laws of Finance. Just this April, I started to publish my quarterly statements of financial assets. I hope to keep that up each quarter on Laws of Finance.

7. What do you think is the biggest money mistake law students make?

The biggest money mistake that law students make is getting depressed about their loans. They figure that, since their loans are so big already, a few more thousand here or there won’t matter. That is a recipe for disaster. Just because something is terrible doesn’t mean that it is alright to make it worse. Also, and I know this goes against my own admissions earlier, law students must remain frugal throughout law school and beyond. You don’t need to live more luxuriously as your income (or prospects for income) increase. The way to financial freedom is to save that extra income so that you won’t have to work forever.

8. Do you have any suggestions to other law students regarding their personal finances?

My only advice is, “Pay attention!” Don’t just forget about your financial situation because you don’t like the looks of it. Is that extra debt that you are taking on actually worth its cost to you? Do you really need that $6 specialty coffee drink everyday? If you consider the impact of your choices on your overall financial health, you will be much better for it. Just thinking about it might be enough to avoid making some bad decisions.

Thanks, Laws of Finance for that great interview! Stop by Law of Finance, read some posts, and sign up for his RSS feed.

[tags]law school, student debt, money, frugal, personal finance[/tags]

> Brett McKay | 21 May 07 | Debt, Frugality, Interview, Saving | Comments (0)

Save Money by Consolidating Your Student Loans

Written by Brett McKay

This is a sponsored post

Because of the high cost of a legal education, I have to take out thousands of dollars in student loans. Even though graduation is still two years away, I’m already thinking about how to pay off my debt. Besides being frugal and managing my money well, my student debt attack plan also includes using student loan consolidation programs.

What many students don’t realize is when the sign up with FAFSA, they’re getting their student loans from several different lenders. Also, if you get student loans each year, each loan might have a different interest rate. Instead of having to pay back your debt to different lenders at different rates, student loan consolidation programs puts all your loans into one easy payment.

My wife and I consolidated our undergraduate student loans last year with Nelnet. There really wasn’t a particular reason, except that they sent us the most mail pitching their service. We were able to lock in at a reasonable interest rate before the rate hikes that happened last year. We’ve been really happy with it so far. Because I’m in school, I’ve been able to defer my payback. Nelnet is very user friendly and we’ve been able to set up an automatic deduction system so we don’t even have to think about writing a check.

PremierStudentLoan.com is another student loan consolidation program. They offer a quick and easy online form to fill out. They also provide a message board where students from different states can discuss student loans. There’s also a nifty student loan calculator. PremierStudentLoan looks like a decent debt consolidator.

Next time you get a letter in the mail encouraging you to consolidate student loans , don’t throw it away. Now is the time to start researching into how you’ll pay back your student debt. Debt consolidation could be a helpful tool.

 

 

> Brett McKay | 18 May 07 | Debt, Student Loans | Comment (1)
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