A Timely Letter to My Teenage Self (The True Cost of College)

A message from the future warning me of the true cost of college may have changed the course of my financial life.

I recently discovered an email l sent to my younger brother in 2012. He was just about to graduate high school and did not have the slightest clue of what the true cost of college is. My email described the things I wish I had known about paying for college. Things that might help him get off to a better start. Some of which I have only recently grasped the impact it’s had on my financial life.

After I found this email, I got the idea to write a letter to my younger self at the time I would be starting my 8-year college career. It was a letter to draw attention to all the financial aspects I wish I had understood before taking the easy handout of student loans. Perhaps if I received a letter like this back in 2002, I would have spared myself from having to pay the inconceivable amount of $40,000 from student loan interest.

This letter will be the beginning of a personal reflection story about the true cost of college. You’ll learn how I managed to crawl out of $186,000 in student loan debt in just 5 years and the takeaways that’ll let you do the same.


The True Cost of College

Hello Jenni,

It’s you from the future! You will soon start one of the greatest adventures of your life. Your academic career will begin at a well-rated university and you will be accepted into their Bachelor of Chemistry program. You will then proceed to graduate school and receive your doctorate in Pharmacy.

But it will come at a great cost.

I am writing to you to help prepare you for your long financial journey in which you are about to part take. You may think you are well prepared and that you know everything there is to know about paying for college, but even I didn’t know most of this until a few months ago.

The following are things I wish I had more guidance on when I was preparing to pay for college. I wish I took the time to understand these things before accepting financial aid and what it all really meant for my long-term financial health.

You are at the point in your life where you just received your offer letters from James Madison University and George Mason University. You decide on JMU to get the on-campus, away from home experience. All you can think of is starting this new adventure and are not concerned about how you will pay for it.

You definitely have no idea how much tuition, room, and board even costs! You do know that it will be hard paying for college without any savings. Yet, it’s what you expect from your parents. At first, they tell you not to take any student loans but they will start to struggle month to month to make the payments.

Eventually, you will need to have financial assistance. You won’t think too much about taking out student loans. They have low interest and are offered so everyone can go to college. Plus, accepting money is a lot easier than applying for scholarships or trying to work while in school. Right?

Wrong! Every yearfor the next eight years it will be an ongoing nightmare to fund your education. Take my advice and work harder than I did to cover the cost of college and do it as early as you can.

FASFA: Your gateway to financial aid

No matter what, you have to fill out the FASFA (The Free Application for Federal Student Aid). Any financial assistance is based on this application from student loans, work-study programs, grants, to other types of loan offers.

Complete the FASFA as soon as possible. Most aid is offered on a first-come, first-served basis. The earlier you apply, the more likely you will be offered a Pell Grant. A grant is money you do not have to pay back so be sure to accept it as soon as you can. Spoiler Alert: You will receive a Pell grant in your second year!

Do your taxes early. You need your tax information before you can fill out your FASFA as well as Mom and Dad’s tax information. You know they wait until the last minute to complete their taxes, so get the ball rolling now.

Financial aid is income-based. Our family’s tax information is used to determine the EFC (Expected Family Contribution). Depending on how the school gives out aid, sometimes higher-income families are offered aid. You won’t know if you qualify for any aid until you do this first step. Completing the FASFA right away can open the door for you to receive grants and to not miss out on subsidized loans.

Somehow Mom and Dad will manage to make the tuition payments for a few semesters, but then you will need to help out. Keep an open mind and know that student loans are not the only option.

Student loans aren’t the only way

Scholarships may be an answer to our problem. At this point, I know you think you’ve filled out enough scholarship applications and you’re tired of writing long boring essays. But you need to work a litter harder for your tuition money. God only knows how hard you will be working to pay off your student loans once it’s all said and done. Every dollar that you don’t have to pay back, is one less dollar growing at a 6.8% interest rate.

Get a job. Find a job that has flexible hours that can work around your class schedule. Not having a car on campus the first year will limit your options to on-campus positions. Most on-campus positions fill up quickly and some are dependent on your Federal Work-Study qualification. Again, this is where the FASFA comes into play to determine the maximum income you can earn based on your Federal Work-Study award.

Once you move off-campus and have a car to get around, find a better paying job. I suggest continuing with a pharmacy technician position. It will look good on your pharmacy school application.

Be responsible for more of your bills as you grow into your adulthood. Determine how many hours you can work without distracting from your studies. Make an agreement with Mom and Dad to cover a certain percentage of your tuition or just cover living expenses and books.

Be a lot nicer to your parents and thank them often. You did not have a large college fund or a Virginia529 account to pay for school. They’ve spent their hard-earned money on your education and want to see you succeed. Every semester it will get harder and harder for them to pay the bill.

When it does come time to take out a student loan, be smart, and learn the details of what you are getting into. They dictate the true cost of college for you.

Understand the loan terms and conditions

Once you make the decision to take out student loans, you must follow all of the rules. You will not be granted any exceptions or do overs. These are concrete rules set in stone and you will agree to them when you get your greedy little hands on the money. Welcome to adulthood.

During undergrad, you will need to help to pay for your tuition, room, and board during your second year. The FASFA will help you receive a small Pell Grant but you will need to borrow money through your first student loan.

Your first loan will have a fixed interest with a rate of 4.22% on a $9,926 unsubsidized loan and 5.3% on a $3,500 subsidized loan. Keep in mind, this total of $13,426 will end up costing you $16,068 if you repay it the way I did. Despite paying back higher than the monthly minimum and repaying off early, you still owe 20% more than you took out!

DateInterest Rate/TypeOriginal LoanPaid w/ interestEnd Date
Aug 20035.3% subsidized$3,500$3,997July 2011
Aug 20034.22% unsubsidized$9,926$12,071Jan 2012
Total$13,426$16,068
Repayment at slightly above the minimum, increased the total due by 20%

You will always be offered the maximum loan amount based upon the college’s cost of attendance as a full-time undergraduate student minus your EFC from the FASFA. Every year this amount will increase as you progress through your academic career.

Once the money is offered, all you have to do is accept it. You do not have to accept the full amount. It will be very hard to see the money on the table and decline it. But remember how quickly an extra 20% adds up even on a small loan?

Know what your student loan terms and conditions are. Understand at what rate and how subsidized and unsubsidized loans accrue interest.

Federal student loans are offered at a fixed interest rate over a 10-year repayment plan. By no means you should take 10 years to pay it off.

Learn how the interest will accrue over the life of your loan. Interest for subsidized loans are paid by the US Department of Education while you are in school, during the 6-month grace period after you graduate, or if you enter deferment. The amount offered is typically less than unsubsidized loans.

Interest for unsubsidized loans starts to accumulate immediately. Any payments made while you are in school, during the 6-month grace period after you graduate, or if you enter deferment will be applied to the accumulated interest. This will save you money in the long run. If you do not make any payments during that time period, any accrued interest will be added to the principal amount of your unsubsidized loan.

There is one more type of loan that will be very tempting. “PLUS Loans” are offered to the parents of undergraduate students or directly to professional students. These types of loans should only be taken when necessary as they are unsubsidized loans and have a higher interest rate.

Health professional programs are offered higher limits on unsubsidized loans but also still require parental tax information for the FASFA.

Really appreciate how interest accrues. If you always make the minimum payment, most of it will go towards the interest that has accrued since your last payment. Even when I paid a little more than the minimum payment, 40% was applied to the interest first.

Only take what you need. Decline any amount beyond what you need for tuition when you can. You will have the option to take an extra $5,000 as a graduate PLUS loan every year of pharmacy school. Understand that if you take this type of loan to live a more lavish lifestyle instead of working you will be paying it back at a 7.9% interest rate. By the time you start repaying this single small loan, it will have accrued just under $1,000 in interest.

Know who manages your loans. Your loans will be transferred four times over the years. Each time you will need to set up automatic payments and learn how to use each new online platform with each lender. You are responsible for any late fees.

Pay down unsubsidized loans ASAP

Repay your loans quickly. Make extra payments when you have the money available. This will reduce your total accrued interest and get you out of debt faster than 10 years. I made 12 large lump-sum payments to be completely rid of my debt in 4.5 years.

Your student loans will go into mandatory repayment 6-months after you graduate and/or after you defer during residency. Yes, you will have one more year of education but at least you do not have to pay for this one!

Start to pay down unsubsidized loans first. There will an attraction to pay down your subsidized loans first because they are smaller and easier to clear off the record. But, remember those have not been accruing interest from day one, and your unsubsidized loans have.

Let’s take your first unsubsidized loan for example.

A $22,500 unsubsidized student loan will be received in 2006 to pay for the first year of pharmacy school. By the time you graduate in 2010, it will have accrued $6,773. in interest. Then it will grow another $991 during your 6-month grace period and finally another $1,935 while you defer during residency. And that is just one of four unsubsidized loans you will take out.

The true cost of college is greatly increased by compound interest on all your student loans.

You must pay the minimum payment monthly. If you make an extra payment, your monthly payment is still due. At some point in the future, you will make a $4,485 extra payment towards just one of your many loans and you will still owe $409 three days later.

Know how your loan payment will be applied.

  • Late fees will be paid first
  • Outstanding interest since the last payment second
  • Outstanding principal last

You did not comprehend this concept. In fact, you emailed your loan lender and demanded to know why “the extra $300 you paid and have paid monthly are not being applied only to the principle.” They simply replied, “Thank you for sending us your email inquiry. Please note: You must satisfy all unpaid interest before we can apply any of your payments to the principal.”

By sharing some of the knowledge I have gained during our repayment period, I know that you/we can make better choices on how we decide to pay and repay for college. I hope that you can take a few bits and pieces of this letter to reduce your overall student debt while you are in school. And then you will need to make a goal to repay what you must take out in less time than I did.

With that being said, you have a long academic journey ahead of you. Try to focus on school and get the best grades you can. Your reward will be to get an excellent job, the ability to pay off your debt, and finally become a millionaire just as I have.

Best of luck,

Jenni from the future

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By Jenni

Jenni began her path to financial independence after pharmacy school left her with six figures of debt and no clear path to digging out. She started absorbing personal finance strategies and built a plan to pay down her debt quickly as a pharmacist.

Years later with her debt at zero and net worth approaching her FI number, she made the jump to semiretirement as a part-time PRN pharmacist.

Learn more about her: Meet Jenni.

2 replies on “A Timely Letter to My Teenage Self (The True Cost of College)”

Not all financial aid is income based. All three of my kids got full free rides for their 4 year degrees, including room and board. I was a high earner and we were already millionaires but their scholarships were 100% merit based. Those are hard to get at private colleges, by easier at state U’s trying to attract good students to get their ratings up. Our kids had decent, but not spectacular ACT scores, lots of their friends also got free rides through for year degrees.

That is fantastic they were able to get a full ride. It was rare to get a full-ride when I went to school or maybe I didn’t know better. I have heard that full-ride scholarships are hard to meet the requirements for all four years then be at a loss of what to do.
It is absolutely true that scholarships may not be income-based but still, often schools want students to complete the FASFA to help ensure they are getting all the help they are eligible for.
I sure wish I worked harder to obtain a scholarship in some form to reduce my expenses. I remember filling out a handful of scholarship applications but felt like I was getting nowhere. I wanted the easy way out and ended up paying for it in the end.

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