Welcome to another installment of IonTuition’s Q&A series with personal finance bloggers. Today we have the Teddy Nykiel, staff writer for NerdWallet’s education blog, offering her financial advice.
Teddy graduated from the University of Missouri in May 2014 with a degree in Journalism. She has spent the last two years as a staff writer at NerdWallet covering student loans and higher education, small business, credit, and other personal finance topics. Her favorite part of the job is interviewing people and hearing the personal stories behind their financial hardships, questions, and successes.
What’s the best piece of financial advice you ever received?
“Take advantage of compound interest” is an important lesson I’ve learned while working at NerdWallet. The earlier you save and invest money, the more time it has to grow.
I’ve started saving for retirement early — I started a 401(k) and a Roth IRA when I was 22. I try to contribute the maximum amount ($5,500) to my IRA each year, and gradually increase the percentage of my paycheck that goes into my 401(k) — right now it’s at 10%.
What’s your advice for those who already have student loans?
Make your minimum monthly student loan payments, but don’t feel like you have to scramble to pay off your student debt early. This can be hard to wrap your mind around when you see headlines on the internet that say things like: “These People Paid Off Their Student Loans in Just 2 Years!” But it’s true — getting rid of your student loans shouldn’t always be your first financial priority.
Before you pay extra to your student loans each month, you should pay off any other debt you have (like credit cards, which typically have much higher interest rates than student loans). You should also build up an emergency fund and contribute to a retirement account.
How do you stay ahead on paying your student loans back?
I have to be honest — I don’t have student loans. I feel very lucky that I was able to cover my college costs through scholarships and with the help of my parents. If I did, I’d make sure to always make the minimum monthly payment on all of my student loans and pay down the loans with the highest interest rates more aggressively.
If you could go back in time and give your 18-year-old self a piece of financial advice, what would it be?
Don’t stress so much about which college you go to. I stressed out so much about getting into what I thought was my dream school. If I had gotten in, I would have been willing to borrow as much as I needed to afford it, which would have left me with a ton of debt. So I think it was a blessing in disguise.
Would you go to a different school if you knew what you know now about student debt?
No. Part of the reason I ultimately chose the University of Missouri (other than the fact that it has a great journalism school), is because it was my most affordable option. I’m from the Chicago area and, believe it or not, it was cheaper to pay out-of-state tuition in Missouri than it was to pay in-state tuition in Illinois.
I was also accepted to a few private colleges that I was interested in, but I would have had to take out student loans to pay for them — my parents urged me not to do that.
Any other financial tips for our readers?
Educate yourself about your student loans and your options for paying off your debt. I’ve talked to borrowers who were completely unaware that they even had debt until they graduated and borrowers who didn’t know what kind of loans they had.
Make sure you know whether you have federal or private student loans (or both), who your loan servicer is, and what the interest rates are on each of your loans. Then you should familiarize yourself with your potential options for getting out of debt: making payments on an income-driven plan, qualifying for a federal forgiveness program, or refinancing your loans. Each of those options has benefits and pitfalls, so make sure you understand the tradeoffs of any decision you make.
One more tip: Pay off the interest that accumulates on your loans during college before your grace period ends. Otherwise, it will be added to your total balance and you’ll end up paying interest on that interest.