Let’s talk about Student Loans

I was at Orchard Road this weekend with my family and chanced upon a busker singing at the pavement.
The sign next to him states that he is busking to pay for his University fee. I have been seeing more of these along Orchard Road during the weekends.

There was also a recent article from http://www.singsaver.com.sg/ mentioning about saving S$80,000 for University in Singapore. Technically, if we were to maintain this rate of inflation till 2035, the average tuition fee will be a whopping S$79,885 (my son would have just graduated by then). Wonder what would Orchard Road be like then — rows and rows of buskers?

An 8-Step Plan to Saving S$80,000 for University in Singapore (read here)

It has been years since I paid back my student loan. I will always remember that day when I received a letter from DBS stating that there is no more outstanding loan. It was a great feeling (until you start thinking about mortgage :p). I really saved hard to clear it. I guess only people in debt before or currently in debt (5 figures++ or more) with no money to their name can empathize.

To me, the number one priority then was to clear the debt rather than invest my money. If I was to invest my money (with the interest I had to pay for my student loan), it would be like filling water into a bucket that is leaking …..counter-productive. As compared to some of my peers who didn’t have student loans or who borrowed money from their parents (via their CPF) for their university education, the interest I had to pay felt like a dead weight. So determined was I, that I went overseas for a short stint (to work) for the higher pay just to clear the debt. And managed to clear it within a year.

I’ve never liked the feeling of being in debt… (unless I am borrowing to earn passive income eg. rental properties)

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According to Robert Kiyosaki (author of Rich Dad Poor Dad), student loans are the worst form of debt because they can never be forgiven or discharged…

Is College Debt Good or Bad Debt? (read here)

According, to the article above, it states that: “Entrepreneurs are so encumbered by student debt they can’t borrow more money to start a business……The conventional financial wisdom is that college debt is good debt because higher education is important for getting ahead. But how’s that working out for our nation’s graduates? Not that well.”

In the case of Warren Buffett, he also felt that higher education may not be for everyone.

Warren Buffett Trashes Higher Education, Says It’s ‘Not For Everyone’ (read here)

Personally, or me, I did use my degree. However, I have relatives or friends who did not use their degrees at all. Their career has nothing to do with what they studied. And in my job, there are many managers who are higher up the ladder who started off with basic general degrees or diplomas (and most will say that their education has nothing to do with what their job entails now).

Well, I guess there are other aspects of education that are important (not just grades). The fact that you meet people whom would have significant impact in your life, your exposure to different cultures / ideas, extra curricular activities… that might ‘blow’ you into different life paths.

The one thing I did not learn in my studies is financial literacy. Well, I didn’t study business or economics or law etc… Secondly, I have few friends in the finance sector.

So what I learned about investing was basically self taught. By reading. When you are out of the academic system, it is basically ‘free-style’… you read what you like (rather than reading for the sake of scoring in a certain subject). And my hobby now is investing.

I always felt that the greatest self motivation I can get in learning something is if I have invested my money in it. Have some ‘skin’ in it.
With a typical academic setting, people are actually paying someone or an institution (might not even be their money, eg. parents are paying for the education), to show them the way and then testing them. Failure is frowned upon on.
In the real world, it is the opposite, people are often left fumbling in the dark, trying and testing… failure is common, but that is how one learn. And when I have invested money in anything, I will be super motivated to learn what I can about it. No need for any external validation or recognition… it is self fueled.

I guess this self motivation is key. In fact without this, even with the best education, the person would not learn or practice it.
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“It’s not supposed to be easy. Anyone who finds it easy is stupid.” Charlie Munger

Nevertheless, although the desire to learn about investing is great, there are numerous humbling moments. Yes, I have paid for some ‘expensive lessons’. For one you just can’t dictate the markets. And it is a never ending learning process… But having said that, you can minimize the risks and avoid the obvious losers.

“You can’t control the environment. So the key is to recognize how it’s changing, accept it, and respond as wisely as possible. The screwiest thing you can do is to think you’re a Master of the Universe. We’re all just little cogs, and the universe will go on without us. We have to fit into it and adapt to it.” Howard Marks, founder of Oaktree Capital Management

Well, back to the topic of debt. As much as I hate debt, there are some debts that are necessary. I like to think of mortgages, student loans and other types of “good debt” as “necessary evil debt.” It’s not the worst thing in the world to buy a home with a mortgage, use a student loan to help pay for university or get financing for your business, but you should always minimize the amount of money that you borrow and try to get the most favorable terms you can.

As of now, I have no debts (no student loans or mortgage or car loans). Yeah… been there, done that, bought the T-shirt, don’t want to go back there again.
However, I am anticipating my son’s future university fee. Hah… yeah.. I started my financial journey in debt, I hope I don’t end it in debt :p.

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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat.
This entry was posted in Investing methodology, Uncategorized. Bookmark the permalink.

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