Why It’s Good to Graduate with Debt – 7 Lessons I’ve Learned from Graduating with Student Loans

Mar 29

Why It’s Good to Graduate with Debt – 7 Lessons I’ve Learned from Graduating with Student Loans

Most of the articles on the subject of student debt in the main stream media are negative. It’s the next major financial bubble, it’s delaying home buying, it’s making people miserable, etc.

In my opinion, a student graduating with $50,000+ in student loans doesn’t need to read another article about how F’d they are and how terrible their choices were. Either they already understand their situation or soon will be forced to understand their situation as soon as their first student loan bill reaches their (parents’) mailbox.

Find the positive in every area.

Find the positive in every area.

I’m here to let the world know that there are actually valuable lessons to learn and positive characteristics that are

strengthened when graduating with $50,000+ in student loans.

Although there are cheaper ways to learn these lessons, I think I will have an upper hand in the long run over someone that went to school with no negative financial consequences.


It Teaches Persistence

Like every big goal, becoming debt free doesn’t happen overnight. For every success story, regardless of the topic, there is an untold story about the years of hard work of late nights and weekends, the perseverance, and the tenacity it took to become a success.

Digging out of debt is no different.

When I first found out the devastation I did to my financial health during my college years, I was in shock. Like most, I tried to find a quick fix, but there isn’t one. It’ will be a long journey and we have to accept that.

As I will mention later in the article, this is why it’s important to manage your money and to have a plan. Once you manage your money, it eases the feeling you have about your financial situation. You can track your situation and know you’re on the right track because you’re reviewing it every single month.

You can confidently say, yes, I improved. I am in a better spot now than I was last month.

Many areas of your life become much better once you have your situation under control. It doesn’t need to be completely fixed, it just needs to be managed to give you the mindset that you’re progressing.


Because the goal of being debt free is a long term goal, it will teach you to break the goal down into smaller increments, celebrate successes, learn from mistakes, and continue to ensure your actions are aligned with your ultimate goal.


It Teaches the Value and Power of Money

Money has power whether you like it or not.

At an individual level, money has power over every aspect of your life.

For example, it can run your social life by helping you decide whether you can go out or not, whether you feel guilty for going out the next day when you look at your credit card transactions, or whether you take that weekend trip with your friends.

It’s okay to acknowledge money has power. But with that power comes responsibility. You need to manage your money in order to manage the feelings that come along with money.

For example, when I graduated from college and initially found out how much money I needed to pay back, I felt completely helpless and extremely stressed out.

However, I was able to manage those feelings because I took control of my monetary situation by creating a detailed budget and understanding where my money was being spent.

When you’re in debt, you respect money and don’t waste it on items that really don’t increase your level of happiness. Many athletes make enough money in a year for most of us to retire on for the rest of our lives. However, a few times a year there will be a headline that one of them is bankrupt. How can someone that made $10 million in the past couple years be bankrupt? They didn’t respect money or the power it has (good and bad).

As you begin to transition in your journey to become debt free, the power of money will begin to fight for you rather than fight against you. It’s part of the reason I started the Opportunity Fund and the reason emergency funds are so important. It helps give you power to stay out of getting in more debt or the power to handle unstable job markets.

At the end of your journey, the power of money (through investments) will help support your retirement.


It Teaches to Live More with Less

Most college students don’t have tons of money. STUDYING, cheap beer, cheap food, and cheap activities fill their time.

After graduation, WORK, cheap beer, cheap food, and cheap activities fill their time.

Six months after graduation when they open their first student loan bill, they realize they can’t upgrade all of these activities like they probably thought they could after making ‘grown up’ money.

Maybe they can upgrade cheap food to be only 60% processed food and 40% fresh food, but they are still left with cheap beer and cheap activities.

Eventually, one may research how more healthy meals in a frugal way (think: http://www.budgetbytes.com/). They learn to upgrade these activities by being creative (see the next section).

Also, hen you can’t afford material possessions, it requires you to have fun without them and not rely on them for happiness.

Ten years from now, I imagine I will still enjoy hiking at state parks, walks around the neighborhood, going to the beach, and hanging out with friends around a bonfire. In 10 years, I don’t think I will regret NOT buying a brand new Lexus.

Yes, there may be some lifestyle inflation (ie: healthier food, more travel), but they will be intentional. I can’t imagine a time I would ever buy a brand new car or a 2,000+ sqft house just because I have the money to buy it. I don’t need either because older cars or smaller homes provide the same basic functionality (travel from A to B and shelter).


It Teaches Creativity

The good news about backing yourself into a corner of student debt?


When your back is against the wall, you become more resourceful and look at the situation from every angle possible (that’s when I found Mr Money Mustache, GoCurryCracker, MadFientist, Early Retirement Extreme, and countless more blogs).

Desperation can be creativity’s best friend. The decisions may be unpopular or ’embarrassing’ to friends and coworkers, but they help forge all the lessons I am talking about.

I bet you know more than one person that moved back in with family after graduating college. How about someone that’s traded their Plasma for money? How about someone that picked up bartending on the side? How about someone that rented a room in a house instead of getting their own apartment?

I know these are normal practices, but (at least in my profession) this is not common. If you’re a lawyer, accountant, engineer, or in a similar profession and a coworker saw you working at night as a janitor (something I’ve actually applied to and never got a call back…), it would most likely be embarrassing.

How about some covert operations? Last year, I signed up for a Master Card , it gave me $300 if I spent $1,500 in the first 3 months. Then I cancelled that credit card before the annual fee was due for the next year. Definitely not a long term strategy, but it teaches other ways to make money besides 9 to 5.

It also teaches creativity through thinking outside the box to have fun!

Instead of going out for dinner and drinks for $100, have a board game night! Most people have random games they accumulate over time. Have people over, bring some food, beer, and it’s normally just as fun, actually normally it’s MORE fun than going out because it’s in a personal setting and you can actually have meaningful conversations that you can’t have across a bar. Financially, it will be about 1/4th of the cost of going out.


It Teaches Personal Finance

Even accounting and finance professionals don’t necessarily understand personal finance. Most classes revolve around corporate accounting/finance and the personal finance courses are electives. At my school, I took our only personal finance class (2 credits out of my 150 credits) and it DID expose me to important topics, but there is only so much a two credit class can cover.

Graduating with debt will force individuals to better understand the different types of interest rates, payment plans, the trade-offs between paying off debt and saving, and hopefully the process of budgeting and tracking money. It’s rare these are taught in college, and even more rare they are taught in high school (the most important time to understand these PRIOR to attending college).

The process of budgeting is a lifelong skill that will benefit these individuals and teach a new way to think about money. If you don’t learn it in high school or college, you can bet you’ll be more familiar with the subjects after the first student loan payment is due.


It Teaches Consumer Debt Aversion

I have a car loan on a used 2007 vehicle I purchased a couple years ago, but it was due to a conscious financial decision between the interest rates I could get on a loan vs my student loan debt rates.

Other than that, I have never paid a penny of interest on credit cards and pay them off at the end of each month (which is why you don’t see any credit card debt on my liabilities in my net worth posts).

A demonstration of debt aversion? I did not have living room furniture or a non-futon bed until I was 22 or 23 years old because I knew I couldn’t afford it. I could have easily financed the purchase of these items, but it would not have made financial sense.

Trust me, Ms. Red to Riches gave me a few weird looks when she walked into my apartment for the first time and all that was in the living room was a wireless internet router.

Eventually, I received a beat-up-hand-me-down-couch for free (from one of Ms. Red to Riches’ relatives… surprise surprise).

My point? Because of my student loans, I knew I couldn’t afford any type of consumer loan unless it was a necessity (a car was in my profession and location).

Many graduates are delaying purchases and thinking twice before financing a brand new TV or putting a vacation on a credit card.

More relevant to main stream media, they are delaying the purchase of buying homes and it’s a drag on the economy. That’s good! Because they’ve learned their lesson.

I purchased a $95,000 home with Ms. Red to Riches when we qualified for more than $300,000. We literally made it a point to our realtor not to show us homes over $110,000 because we couldn’t afford it. The bank thought we could afford it, but we knew if we wanted to crush our student loan debt, we would have to live well below our means.


It Teaches the Value Education

The mentality of most college students in their first year is, “I’m in college because that’s what most people my age do. College is supposed to be fun and create new experiences. When I graduate, MAGICALLY employers will value me way more than someone that didn’t go to college. Where’s the keg party?”

I’ll admit, I attended my fair share of parties and pulled off some shenanigans, but I was still dedicated to my education and graduated with over a 3.75 GPA. It’s possible to balance the fun with the real purpose of why you’re taking out student loans. I think knowing I was going to have to payback my loans helped me focus on my studies.

However, like many, my mentality toward student loans did not change until it was too late.

I thought it was part of the process. Fill out a FASFA and you’ll get a loan… unless you don’t qualify. Then you take out a private loan that allows you to attend college like everyone else. Interest rates? I don’t know. My Mom helped me fill out the form and was happy we qualified for the loan. I can’t be the only one, right? I accept! (yes, naive).

All of my student loan statements were sent to my permanent address (ie: not my dorm or random apartment for the year). I think it was my junior or senior year when I saw one of the statements when visiting my family. $40,000+ of principal and a whole crap load of deferred interest! WHAT!?

That one statement (of money) finally put a dollar amount to my education (even though it ended up much higher). Either way, it motivated me. I had to earn a return higher than the amount I spent on my education. Although I was already on a successful path in regards to school, it made me more motivated at the several internships I landed before I graduated. I worked my ass off to make a great impression. I knew I needed a good job as soon as possible after graduation and it had to be one that paid well.

It worked.  I signed my acceptance of my ‘big boy’ job prior to graduation. It gave me validation that my education was worth it, and like most things, the payoff isn’t immediate, but in the long run, it will be beneficial.



All of these lessons are lifelong lessons. In my case, graduating with $75,000 of student loans probably wasn’t the most efficient way to learn these lessons, but I am confident I will carry these lessons through the various stages of my financial life.

As soon as my debt is gone, these core lessons will help increase my wealth exponentially.

If I went to college for free, would I have learned these lessons? Maybe. But maybe I would have graduated with a great paying job and felt wealthy immediately and bought a brand new car, a large home, and be in the exact same financial position as I am now… except I would have never found the early retirement community and learn the value of money and the power of saving.

Student loans do suck, I can attest to that, but there is always a bright side in every situation. Find yours!


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One comment

  1. Thanks for sharing Red to Riches. I can tell you’ve seen your fair share of those “student loan debt” articles. As always, the media tends to go to extremes….and every situation is different. I don’t think that having some student loan debt is the problem, after all my wife did and we paid that off pretty quickly. I think the problem is when someone like by buddy’s wife racks up $100k in student loans and either doesn’t finish the degree…..or doesn’t use it. The problem is when the students don’t follow through…or made poor choices.

    I’m glad the debt is motivating you. I hope you have a great week

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