Student Loan Planning: Can I Afford Not to Save?

After I graduated from KU, I had a semester off of school. Notice how instead of giving a time frame or the season, I put semester even though I had graduated from college. I’m well programmed folks. My parents paid for my rent of $300/month and I paid for the rest of my expenses from my job at Walmart. When I started I was making $7.50/hr and worked part time. When I left I was making $9.00/hr and worked full time. Now, I wasn’t paying all of my expenses like health insurance and the lot, but as someone who has never worked anywhere besides a daycare, I felt like a wealthy man. I earned my keep during my time there and while I was frugal, I profoundly enjoyed having the freedom to do what I wanted with my own earned money.

I bring this up because many of us in college, go from earning next to nothing to a substantial sum in a narrow time frame. I already got a taste of what that was like when I was making $350/week. I can barely imagine making over $1,000/week. I’ve already encountered several people who are living the “American Trap,” err I mean “American Dream.” Make more money? Spend more. You deserve it. You spent $300 on decent housing in college? Time to triple that. Now nobody likes having to pay off student loans. What we need to figure out is what we do with our newfound freedom that money has provided, while at the same time appropriately managing student loans. We need to figure out a concrete system to balance paying off student loans and spending the money that we have worked so hard for. If only…


Let’s say you’re putting down $666/month ($8k/year) towards your loans on a standard repayment plan for ten years. (Loan estimator here) In all seriousness that really is a feat and takes a lot of discipline. It’s got this whole, “pay us or we’ll ruin your life” vibe to it, but great discipline none the less. For this time period we will save $166/month ($2k/year) for the first 10 years and $10k/year for the next 20. This will be scenario “A”

Now let’s compare that to saving $4k/year (“B”)  and $6k/year (“C”) for the first 10 years and the same $10k/year after ten years so we are only comparing the results of the initial savings differences. *7% annual compound interest


As always, appreciate the numbers and the curves. The key here is the scale, not necessarily the absolute numbers. Although I did try to make those reasonable.

Knowledge Parcels
  • Putting away $2k/year for the first ten years produces $553 k in value after 30 years. This is $114.4 k LESS than the $4k/year situation and $228.8 k LESS than the $6k/year scenario.
  • The $6k/year scenario came out ahead by 41%
  • “Sam, you saved the most in the third situation, of course you ended up with more ya dingleberry.” Yes, but I only saved an additional $40 k more vs the first scenario and by the end I came out ahead by $228.8 k. Boom.
  • To have the $2k match the $6k scenario, I’d have to save an additional $5.2/year ($15.2k total) for the following TWENTY years. That adds up to having to save an extra $104,000 vs $40,000 in the first ten years.


Well then. That was a blasty blast. Another salient reminder of front loading retirement savings. Can you afford not to save early on? Probably, but I hope you really like working full time for 40+ years. In the end, do what is best for your financial and personal goals. This exercise is simply another asset in your “mental Rolodex” as one of my professors would say.


Ramble on,



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