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Really grateful I will be able to graduate debt free. Doing a degree like CS where I can get a great paying internship really helps. I think the biggest cause

Really grateful I will be able to graduate debt free. Doing a degree like CS where I can get a great paying internship really helps. I think the biggest cause for numbers like this is that some of us see it as problem while tons of people see this kind of debt as totally normal. I cringe when I see friends who I know are graduating with large amounts of debt run out and buy a brand new car within months of graduatingbecause they are suddenly making 50-60k and feel like they've got it made. Most of the time it'll all work out just fine, but I can't help bit think that there's a better way.

slowmovintarget 9y ago
I'm not sure about "just fine". For many (especially in the software profession), the difference between doing "OK" and being well-off in later years is that new car. Paying off debt early at that point in one's career is more profitable than investing, even.
- yathern 9y ago
  > Paying off debt early at that point in one's career is more profitable than investing, even. Not necessarily true. My student loans had an interest rate of around 4%. The market is about double that. This means that if I invest everything, and pay off my loans slowly, I eek out a few extra bucks. I actually did that math and decided it was wiser to eliminate my debt. Total net worth isn't really the goal, not worrying about money is the goal. And not having to worry about monthly payments, and knowing I have no outstanding debts is much nicer.
  - mathgladiator 9y ago
    The same thing is true with having a house. Sure, the math works out in favor of holding the debt and investing in the market. However, this logic has never sat well with me because it assumes that you can predict your situation for 30 years. The conspiratorial part of mind suggests that finance is more invested in having people in debt than without, and the math is there to beat people over the head saying "you are not playing this game well because this math says you will lose in the end"
    - torstenvl 9y ago
      You also don't pay income tax on debt interest you saved yourself from accruing.
      - mathgladiator 9y ago
        Wow, you just blew my mind. I never thought about this, and now I need to run to excel...
    - stevekemp 9y ago
      Agreed. If you genuinely do put your extra-money aside, and invest it in index-funds, etc, you will probably end up with a higher return than if you pay off your mortgage early. That said most people plan to do this, and never get round to it. I knew I was making a "mistake" when I started putting all my spare money into paying off my mortgage early, in the sense that I could have achieved more money by investing. But it seemed obvious to me that owning my house would let me ride out problems more easily in the future - my bills would suddenly come down to "electricity, food, and little else". As it happens my wife and I decided at reasonably short notice to change countries. Having paid off my mortgage allowed me to rent out the place, without having to worry about getting permission from the bank, or anything similar. I just had to register as a landlord and switch to a more expensive form of insurance. After two years of being abroad selling the place made sense, to avoid complex cross-country taxing issues. But by owning the place outright we had the freedom to try renting for a while, and worry less about income.
      - slowmovintarget 9y ago
        A mortgage is what my SO calls "good debt". Reasonable interest on an appreciating asset. Car notes, on the other hand, may or may not be "bad debt" as the asset depreciates immediately and the interest might be high. Credit card debt is most certainly "bad debt". If you can't pay the card off at the end of the month, then you can't afford whatever it is you actually bought. Rid yourself of "bad" or "marginally bad" debt immediately, manage the "good" debt, then save (rainy day fund, 401K, IRA, speculation). You're doing well if you get to the speculation part.
  - caseysoftware 9y ago
    The ROI was double that up until ~2 weeks ago. Alternatively, if you pay off debt, that is a known ROI and doesn't disappear after a bad day or week. And that's not counting the psychological benefits of not being in debt. About 10 years ago, I had a car payment, student loan payments, etc, etc and once it was all paid off, I realized I could make $X000/month less and still have the same quality of life. It was empowering and afforded me the ability to take other risks. Knocking out debt isn't always the best answer but it's a pretty good one in most scenarios.
  - gowld 9y ago
    > My student loans had an interest rate of around 4%. That's a tiny fraction of the debt mentioned in the OP. Federal loans are great. Private loans are usurious. Also, "eke". "Eek" is when the market has a correction that destroys or leveraged plan.

slowmovintarget 9y ago

I'm not sure about "just fine". For many (especially in the software profession), the difference between doing "OK" and being well-off in later years is that new car. Paying off debt early at that point in one's career is more profitable than investing, even.

yathern 9y ago
> Paying off debt early at that point in one's career is more profitable than investing, even. Not necessarily true. My student loans had an interest rate of around 4%. The market is about double that. This means that if I invest everything, and pay off my loans slowly, I eek out a few extra bucks. I actually did that math and decided it was wiser to eliminate my debt. Total net worth isn't really the goal, not worrying about money is the goal. And not having to worry about monthly payments, and knowing I have no outstanding debts is much nicer.
- mathgladiator 9y ago
  The same thing is true with having a house. Sure, the math works out in favor of holding the debt and investing in the market. However, this logic has never sat well with me because it assumes that you can predict your situation for 30 years. The conspiratorial part of mind suggests that finance is more invested in having people in debt than without, and the math is there to beat people over the head saying "you are not playing this game well because this math says you will lose in the end"
  - torstenvl 9y ago
    You also don't pay income tax on debt interest you saved yourself from accruing.
    - mathgladiator 9y ago
      Wow, you just blew my mind. I never thought about this, and now I need to run to excel...
  - stevekemp 9y ago
    Agreed. If you genuinely do put your extra-money aside, and invest it in index-funds, etc, you will probably end up with a higher return than if you pay off your mortgage early. That said most people plan to do this, and never get round to it. I knew I was making a "mistake" when I started putting all my spare money into paying off my mortgage early, in the sense that I could have achieved more money by investing. But it seemed obvious to me that owning my house would let me ride out problems more easily in the future - my bills would suddenly come down to "electricity, food, and little else". As it happens my wife and I decided at reasonably short notice to change countries. Having paid off my mortgage allowed me to rent out the place, without having to worry about getting permission from the bank, or anything similar. I just had to register as a landlord and switch to a more expensive form of insurance. After two years of being abroad selling the place made sense, to avoid complex cross-country taxing issues. But by owning the place outright we had the freedom to try renting for a while, and worry less about income.
    - slowmovintarget 9y ago
      A mortgage is what my SO calls "good debt". Reasonable interest on an appreciating asset. Car notes, on the other hand, may or may not be "bad debt" as the asset depreciates immediately and the interest might be high. Credit card debt is most certainly "bad debt". If you can't pay the card off at the end of the month, then you can't afford whatever it is you actually bought. Rid yourself of "bad" or "marginally bad" debt immediately, manage the "good" debt, then save (rainy day fund, 401K, IRA, speculation). You're doing well if you get to the speculation part.
- caseysoftware 9y ago
  The ROI was double that up until ~2 weeks ago. Alternatively, if you pay off debt, that is a known ROI and doesn't disappear after a bad day or week. And that's not counting the psychological benefits of not being in debt. About 10 years ago, I had a car payment, student loan payments, etc, etc and once it was all paid off, I realized I could make $X000/month less and still have the same quality of life. It was empowering and afforded me the ability to take other risks. Knocking out debt isn't always the best answer but it's a pretty good one in most scenarios.
- gowld 9y ago
  > My student loans had an interest rate of around 4%. That's a tiny fraction of the debt mentioned in the OP. Federal loans are great. Private loans are usurious. Also, "eke". "Eek" is when the market has a correction that destroys or leveraged plan.