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Student Loans and Millennials: How Not be Dumb with Money

A lot of millennials nowadays are taking out loans to pay for college and astoundingly so. High school students probing different college options often are conditioned by the ludicrously high tuition prices of universities. Generally speaking, state schools offer lower tuition costs, meanwhile private schools offer higher tuition prices and usually better aid opportunities. The main buzzword regarding one’s financial situation is Free Application for Federal Student Aid (FAFSA). This ends up determining how much external aid one can get to pay for college — possibly a package of federal and private loans, grants, scholarship money depending on the institutions you send your FAFSA to. (Hint: for high school students reading this check out the different aid methodologies colleges use, and what type of methodology the colleges you are looking at use. Hint #2: Pray your college uses federal methodology!)

But first, let’s take a step back. I went to a public high school in Illinois and graduated with one semester of AP Macroeconomics under my belt, a class I loved. A state-mandate required I complete eight semesters of physical education to get that diploma. So as I walked out the doors of my new alma mater, I knew how to do three sets of 10 repetitions of triceps extensions, but did not have the slightest clue as to how loans worked, what a mutual fund was, or what it meant to be a stockholder. 

A few months upon graduating however, I began my collegiate experience at a private university with a total sticker price hovering around $58,000. It was my dream school, and the best academic institution that accepted me; I figured education was the best investment I could make in myself and my future, so I dove in. I even saw it as my duty as a citizen, bestowed by the wisdom of Thomas Jefferson: “If a nation expects to be ignorant and free, in a state of civilisation, it expects what never was and never will be.”

My parents both work and make a good living but with two kids in college, a mortgage, and retirement approaching, I became a stakeholder in my own future by taking out loans to pay for my pricey education. Leaving the comforts of high school and entering college is a formative time period for millennials; nevertheless, along with the new freedoms allowed by independence in college one assumes new financial responsibilities. A cost of $58,000 isn’t exactly pocket change, but there I was standing on the steps of a new chapter of my life.

As a millennial, and one of many who will graduate with debt (money I owe to someone that I must pay back), there seems to be a serious and potent problem with how that knowledge gained from high school translates to problems one encounters after high school. In May 2012 I began researching what I could be doing with the money I had saved: an attempt to think my way out of my loan debt increasing with each passing moment. My accumulated earnings were gathering dust in a checking account; a sense of relief overcame my psyche when I realized I could be putting that capital to work.

I picked up a copy of The Intelligent Investor simply on the knowledge that it had Warren Buffet's endorsement. To the extent of my knowledge, Buffet is the king of modern investing.

I began scratching at the vast world of the stocks, bonds, mutual funds, ETFs, etc. Instead of keeping my saved capital in a checking account, where I earned a lovely 0% interest, I learned I could put that capital into other vehicles where my capital could grow on its own. My saved money could be growing, without me touching it! But despite my high school diploma, I had no clue that I could be doing these things with my modest earnings. At least I knew what my target heart rate was for a cardio exercise regimen.

I have written this piece as an introduction to a larger series: my own exploration into the expansiveness of personal finance. And trusting that other millennials may be in the same boat, I hope for this to be a space where young people can exchange articles, tips, videos, lessons, and advice in the comments section. It is my hope that finance veterans will bless us with their input in the comments as well. I will explore the different financial indexes (what’s the difference between the NASDAQ and the Dow?), how markets work, what to look for in researching different stocks, and anything else I learn that I think other millennials may benefit from reading. We shall build the boat as we sail it.

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