Postpone College In Order to Pay For It With Cash?

This article is by Adam from Money RelationshipSubscribe to his site to get free updates on his journey out of debt.

One of my biggest financial regrets was taking out student loans for college. My wife and I currently have about $110,000 left to go on our loans and frankly, that number is hard to look at. I know for a fact that I could have graduated with $0 in student loans but I was just stupid with my money. I had great jobs throughout college but instead of using my money towards school, I used it for other useless junk.

I imagine many of you did exactly what I am about to tell you. Every semester, after the financial aid office received my Stafford loan disbursement, it was always for more than I owed the school. So of course, they cut me a check for the difference. Instead of using that money to pay off the loan (because I obviously didn’t NEED the money), I blew it on stuff that I can’t even remember. It was something that I always looked forward to every semester because it felt like free money. I thought to myself, don’t worry about it, you’re going to get a great job when you graduate and you’ll be able to pay it off in no time! Well, after 6 years of doing it (undergraduate and graduate), it added up. Now I’m stuck paying over $600 a month just for my loans. Oh, and I’m not even working in the field I got my degrees in!

Postpone College Until You Get Enough Cash?

Looking back, I know I could have paid for my first year of college with money from high school jobs. Well, what if you didn’t have a high school job and your parents didn’t save anything for your college? Should you wait a year until you get that money saved up? Personally, I think that it’s best to pay cash from the beginning. If you don’t have enough cash to start school then get a job to help pay for it. At least it will force you to get out in the real world and get some experience being an adult. That can be invaluable.

In addition to getting a job, you should also be looking for scholarships a couple of hours a day. Apply to as many as possible. The majority of them will probably reject you but I bet you will get a least a couple. Just think, the more scholarships you get, the less physical work you have to do!

You’ll Learn More By Paying in Cash

Another benefit to paying in cash is how it almost forces you to learn more. I have taken several classes that I paid cash for and I studied a lot more because I didn’t want to pay for it again. When I took classes using loan money, I slacked a little more. I’m not sure why, but I just knew I wouldn’t feel the financial pain as much if I had to take the class again (I never had to take a class a second time).

What do you think? Should you go straight to college even if it means taking out student loans?


  1. If you can stomach it I think it helps to go to college a little mature. You will have some real world experience behind you and also have had some time to think over what field you want to go into.

    Also I really never want to go into debt again and will definitely be saving 100% cash if I decide to go to College.

  2. I respectfully disagree.

    The jobs you’ll work without a college education while you are trying to save for one will be low paying. The longer you’re out of school the harder it is (and less likely you are) to go back.

    Each year you’re not working in your desired career choice will mean a loss of higher income and other benefits such as health insurance and retirement funds. (And remember, retirement plans have the beauty of compound interest!)

    A better choice is to start your college education at a community college and work hard while you’re there. Then transfer to a four-year college with some transfer scholarship options. Stay out of credit card debt and work your way through school as fast as you can.

    I used to be an academic adviser at a community college, and I saw both traditional and non-traditional-aged students waste years of their lives “working” to pay their way through college. Their grades suffered and they were miserable.

    I’m not a big proponent of student loans, but I think that if they get you into a high paying job faster, they can be a useful tool for creating a better life.

  3. I agree with Krista. Just because you racked up a huge debt during your college years, doesn’t mean that people should swing to the other extreme and try to pay cash.

    You said that if you had been prudent with your finances during college, you wouldn’t be in this mess. So why not focus on helping people learn how to manage their finances during college?

    I will say that if people are going to college so that they can get a great job, they are on the wrong financial path, as W2 employees pay the most in taxes.

    Get an education to be sure, but learn how to be an entrepreneur to build your own business, so that you can minimize your taxes and leverage having other people work for you and your goals, instead of the other way around.

    Invest in financial education. Read Robert Kiyosaki’s books, Rich Dad, Poor Dad; The Cashflow Quadrant; and The Conspiracy of the Rich.

    Just my two cents.

  4. @Christina – I can agree somewhat with your disagreement. I feel that if you absolutely must go to college without having the cash to pay for it, you should go to a community college like you suggested.

    Even if you know what you want to major in, going to a community college to get your general education classes will save quite a bit of money. Like you said, working your butt of in class will also pay off with scholarship offers from other colleges.

  5. @ Christina and @ Adam, this is a great compromise. When I finally get round to getting an education I am seriously considering open university (online uni) which is much cheaper too…

  6. After some consideration and planning I will be going back to school and paying cash.

    For the longest time I couldn’t decide what to go to school for, so for me taking loans for something I really didn’t want was dumb. I found ways of getting help with school, but even then I couldn’t figure out what I wanted to go to school for and didn’t want to waste the money. Even if it wasn’t mine.

    After starting a business and being in the real world there are 3 majors I want to pursue wholeheartedly and am proud of doing it with cash. I may be older than most college kids, but I have always looked at things differently than other people and think about taking loans as a last resort only.

  7. Although I did not have enough cash to pay for all 4 years outright, I could have paid for probably the first two. My choice was to take the loans anyway and save the cash. Interest rates are low and money is easy right now…as it was back then…actually, that’s probably the main reason we have a recession now.

  8. Sometimes waiting is better – financially. Because she is not anyone’s dependent, lives on her own, is a single working mom, my daughter has all kinds of scholarships available to her.

    So far she has made it thru 3 years of college with NO student loans… She manages to carry a full college load, work 30-35 hours a week, and be a mom to 2 grade school kids. She works her college schedule around their school time.

    Because she is doing it herself, and knows why she is doing it – a better life for herself and her kids – she is totally committed to the process and focused. She makes the Dean’s list for grades and was also treasure of the student body last year and our community college, and President of the student body this year.

    Commitment and focus are not usually that strong til one is a bit more mature.

    And whatever happens, she WILL graduate WITHOUT student loans 🙂 And then she can start her nursing without loans dragging her down.

    It can be done.

  9. Adam- I am a college student now, and you’re totally right. I know so many people who are doing this, along with financing their lifestyles on credit cards.

    When people say it’s not worth it to work at a job if it’s low paying and not related to their major, I’m completely baffled. If the choice is between some money or no money, then it’s worth it! If you can’t find job in your future field, and think you’re too good for any old minimum wage job, then you deserve the pain of paying off all your loans for the next decade.

    You can build up thousands of dollars for college even at the lowest paying jobs, if you’re living at home and working full time during breaks from school, and working part time at school. It’s not glamorous, but neither is 100k in debt.

  10. I took out loans my first two years in undergrad and didn’t need them. I wisened up by junior year and stopped at $15,00 in debt. When I graduated, I paid down over 50% the first six months. I had to sacrifice a few things, but it was well worth it.

    As I plan for graduate school, I’m doing more research to find scholarships and ensure that I really need the grad education for my career. No more blowing money just because other people think I should. Those loans taught me a priceless lesson. Never again will I see loans as free money.

    Working for a year to save money for college is a hard pill to swallow. For people who will definitely go to college after that year, I think it’s solid advice. They’ll learn lessons that I didn’t learn until my first year after school. They’ll be way ahead of the game.

  11. Thank you, Adam for this article. It takes a lot of courage for you to write this, and I commend you for that. It easy to see that you would like to try & help others learn from your experience.

    As a financial advisor, I have been writing a blog of my own for the past year. Last August, I wrote a 3 part series titled “Raising Arizona (and Arizona State)” about the rising costs of college and what to do. In the article, I also mention that it is much better for a student to be able to pay cash for school.

    It is easy to fill out the loan app, and then forget about it until you leave school. “Leave school” may mean to graduate, but can also mean dropping out or postponing.

    Working through High School and saving money is one way to do it. Another way is to simply work for a few years and save – THEN go to college.
    There is a big maturity difference between an 18 year old freshman and a 20 year old freshman.

    Author Anya Kamenetz has a new book also – “DIY U”
    which talks about the future of education. College, as we have known it for years, is changing from the brick and mortar campuses to more customized online venues.

    If anyone would like more information on college savings plans or a free report “The 5 Biggest Problems With 401(K) Plans” you may contact me through my website.

  12. This is a complex issue.

    While it’s true that many young people are not prepared or focused enough to begin college immediately after high school (let’s put aside the financial considerations for a moment), there is the issue of what happens when you delay school.

    For many, this is going to end up being a way to NOT go to school at all. Because yo can sometimes get good-paying jobs even without a college degree, even today, or what appears to be a good-paying job at the time.

    This happened to one of my brothers who was not, to be clear, truly understanding of the significance of a college degree as you attempt to get work, of any kind, in the future.

    He secured a job that to a live-at-home, pay almost nothing for food, room, board guy of 18 paid well. He liked having a lot of discretionary income. Because he had very little, if any, real counseling about job opportunities and the types of education required, he thought he was set and didn’t need college. (this was something like 20 years ago.)

    At the time, I told him I would pay for his college if he chose to go with the caveat that he could pay me back 50% of the amount over 20 years, no interest. I thought that was a motivating yet fair deal. His parents (my mother and stepfather) could never have afforded any college and were so negative about any schooling that they were no help at all. I had enough $$ at the time and felt it was an investment in his future—I really believe in getting as good an education as you can afford, without huge debt.

    (FYI: I got a partial scholarship when I went to college and worked three part-time jobs. I wanted to go to school so badly it never occurred to me that this was tough or demanding. And it was a shock to me to realize that so many kids were getting a free ride from their parents or other relatives. I was busy and exhausted and living frugal was tough when your pals didn’t work and had money to throw around. But I loved what I was studying and loved my college and classes.)

    He turned me down and has since come to learn, sadly, that it was an error not to get a degree.

    it’s true that all degrees are not created equal, whether by type of college or curriculum, or by the amount of work and excellence a student achieves. But in a world where you are judged deficient if you have no degree (as if having a degree alone really indicated quality or excellence! Certainly not always the case), he came to see how he was eliminiated immediately if he did not have one.

    And paying in cash? That, too, may not work when it comes to both staying in school and doing well.

    The father of one friend’s college-age son died and left a sum specifically for his son’s college education. Yea, the kid enrolled in the school he wanted and in two years, he also blew through all the other money, racked up loans he not only could not pay back but stuck on his single-working mom, and had to withdraw. He is now bitter, angry, frustrated because the school won’t let him back in until he pay the loans, which he can’t do, due to no job.

    If you really want a college education, you’ll find a way. Even if it means debt for several years after.

    If you are going to be fiscally responsible about how you pay for college, you will do that whatever way necessary.

    The problem today? A lot of kids are going to school when 1/they don’t want to but feel they have to. 2/ Are really not vested in an education on a personal level and 3/are simply too immature to appreciate what’s involved in getting and paying for an education.

    That’s always been the case, and will continue to be so.

    If I were a parent today, I’d tell the kid: Here’s the deal. We’ll give you X for books, food, housing, misc. The rest? You have to work, get a loan or a scholarship.

    If they want it, they’ll work for it. If not, that’s their problem.

    And all those parents with all the money to blow who just give the kids the money? You’re not helping them at all. Really.

  13. Here is the dangerous thing about student loans right now.

    The lenders (or the government) don’t explain very well what your loan balance is or what your payments will be coming out of college. While you are in school, you can easily not think about it.

    $600/month (as Lynn just pointed out) is a BIG payment for most people. Think about this though.

    What happens if your income isn’t enough to cover the payment? Or What happens if you lose your job?

    Once you are out of school, the lender wants their money back – period.

    Again, paying cash is best. If you really really feel that you must borrow – make sure you know all the costs & fees & payment amounts. Keep it SMALL so that you can get it paid off right away.

  14. Tough call on that one. I ended up going to a smaller college (cheaper) for my electives, then finishing up at the more expensive college for my major degree (even the more expensive colleges was affordable, both public).

    I guess it depends on the value and what the demand is for the major of the degree… If it’s has low business value then pay cash, if it is hot then do whatever it takes (within reason)…

  15. @Adam — Thanks for this post. I haven’t agreed with some of your writings thus far at FrugalDad but you nailed it on this topic.

    Let me add a bit more to the discussion — by delaying college to work, some may realize that traditional college is not the best route to take for them.

    I know many people who were told the “must” go to college to be a success in life, but they struggled because ultimately, they didn’t want to be there. One friend of mine from college took six years to graduate, racked up big student debt and then realized they like working in an industry that neither requires nor rewards people for a college degree. He makes good money and is happy in his career, and it didn’t require a degree.

    My point is that either by working your way through college with cash or by delaying college for a bit, the perspective gained could be as valuable as the education you might have received.

  16. My granddaughter is in the process of preparing to leave for college in the fall. At this point, we are searching for scholarships that will offset the cost because during the daily course of our jobs we hear stories from countless college grads who are overwhelmed with debt from student loans. Hopefully, the funding sources will be adequate enough throughout her college years that once she earns a degree she is able to transition directly to putting it to work rather than having to worry about repaying it. And, yes, working will be an option as well.

  17. I find it really interesting that because you racked up enormous debt by being irrisponsible with the resources you had, you suggest that it would be better to postpone school indefinitely until you can pay for it all without a single loan.

    I think both extremes are horrible options. Why not focus on getting an education without excessive or unnecessary debt? I worked through school and came out with only ~$7,000 in debt. If I had been determined to save it all up before going, then I would have delayed my education by years, only to stave off a debt that I paid off in a matter of months once I got my first job.

  18. Here’s what I’m wondering. Would the person who took out way too much student loan money also be the person who, try as they might, wouldn’t really be able to save money for college because they would constantly be spending it on things they “couldn’t live without”?

    You present a solution that probably would work for many, but many of the people who take some time off before entering college are probably also the same people that could take out a modest amount of student loans and still come out fine in the end because they are already smart with their money.

  19. without a doubt an excellent notion, however many kids are not mature enough to make this decision at that age. I know I was under the impression that “after I graduate, I go to college, that’s just how it works”. I’m guessing many young people today have the same perspective.

    One thing I would suggest is going to a community college first, knock off quite a few gen ed’s then transfer to the college of your choice. This will save you THOUSANDS.

  20. I’d also like to make that point that each year that you delay going to college, tuition rises 4 to 10 percent. It will become harder and harder to save for college as the goal gets harder to reach and the cost of living increases.

    If you know exactly what it is that you want to do at college, figure out the least expensive way to make it happen and don’t delay!

    As a previous commenter said – it takes far less effort to pay off a few thousand in school debt as a college graduate with a great job, then it does to save up for a college education costing tens of thousands on a lower paying job.

  21. I would have to disagree. It makes more sense to look for small scholarships and go to the best yet most affordable school.

    There’s a lot of 3rd party scholarship money that goes unawarded every year due to lack of applicants. Spending just 5 hours/week applying to scholarships would yield a lot more money than working a high school level job.

    Many of the best universities like Brown will pay full tuition for any family with low income status.

    Most schools outside the top 10 Ivy League are pretty similar. I ended up going to my state university which cost significantly less than the other schools, got a full tuition scholarship, and graduated debt free. I know a lot of students who yearn to travel to the other coast or big city and end up spending 2x or 5x as much as a local university that’s just as good.

    I also have a lot of friends that spent their first 2 years at community college before going on to a 4 year program and loved it. Community college professors really care about teaching. Whereas, I’ve seen the more prestigious the school, the worse teaching quality for undergraduate students. I’m a grad TA at one of the most expensive private universities in the US and seen some of the worse teaching ever.

  22. I guess what I am trying to say is save enough for the first year and then pay for the rest as you finish. I’m not saying save for all 4 years here and then end up never going to school.

    I am just pulling from my personal experience. Like I said, I know I could have paid cash for all 4 years but I got distracted with the money that was hitting my checkbook.

    If you can graduate in four years with less than $10,000 in loans, it may be worth it. That all depends on if you can get a job too. Personally, I went 9 months without a job after I graduated in 2008. It was a financially painful.

  23. Obviously, everyone’s situation is different.

    However, I would wary of working until you can pay for college. I think it would be very easy to just keep working and never get the degree.

    Also, I think I would feel really isolated if I wasn’t headed to school in the fall. Most/all of my friends from high school would be in school so I’d feel completely out of the loop.

    I think a better option would be to go to a community college or simply take out minimal loans for a state school.

  24. I think it’s a great idea to pay your way through school with a job and scholarships!

    I don’t think people should postpone school unless they absolutely have to simply since it’s easier to blow off going if you don’t immediately start. I loved your idea of going to community college first…that would have saved me $8000.

    Thanks for the post!

  25. I think most people are only focusing on the fact that Adam mentioned holding off on a college education as a “minimal” option. He went right into saying…or get a job right away when you go to school to help offset costs.

    The fact of the matter is that most of us TRULY do not need to depend fully on student loans to carry us through a college education, but we do. And this is the main point of this article. Sadly we do pay dearly in the end. Loan companies are not allowing ppl to consolidate any longer (like myself) because of the economy, which means my loan payments each month are like $600. Now, I DID work throughout college, like Adam mentioned and chose to not use that money towards school because I kept thinking…”Oh I will have a good paying job when I get out to pay off loans. Well I do have a good job, in my feild, but the thought of having that extra $600 each month to save for a house or anything would be a huge thing. It NEVER sinks in until you get out in the real world.

    If I were a parent, I would URGE my child to pay their way through school the best they could so that they could have a huge weight off their shoulders at graduation!

    Good Article!

    I may not have been able to pay for school 0 cash with the jobs I had through college, but I could have cut it down half.

  26. It really depends on the college. Too many people go to a more expensive school just because they like to see THAT diploma on their wall or brag to their “less successful” friends about which prestigious school they attended (most people starting college don’t graduate).

    Go to a less expensive school. Get your sheepskin and get to work. Debt or no debt. If you don’t get that degree, you’ll always regret it. Trust me. I regretted it for 15 years. I borrowed more and went on to get my MBA and now make $175k. Just 7 years ago, before I finished both degrees, I was making less than $45k.

  27. My “surplus” loan money was spent on heat, rent, food, etc.

    I don’t think it would have been better to wait until I could pay out of pocket. The jobs a high school graduate can get are pretty low-paying, and when you factor in rent, bills, food, and maybe even a little entertainment… there ain’t a lot left for the college fund. Saving up the $40K I had in loans would have taken ages.

  28. I’m fortunate that my parents were able to pay for me to go to college. But I still worked really hard for my degree and I have a great job now.

    Just because my parent’s paid for it, doesn’t mean I don’t appreciate it. My parent’s taught me good money management and I was responsible enough at 18 not to blow all the money on stuff I didn’t need.

    I think people shouldn’t wait…if you take a year off to work at McDonald’s, you still won’t have enough to pay for college and you probably won’t go by that point.

  29. Education, like a lot of things is wasted on the young, the lucky tykes!

    I was okay with money in college (in fact I left with spare change, setting the scene early!) but I’d appreciate it much more now.

    I can’t hardly believe I had 3 years just to wander about reading up and learning about stuff. I should have appreciated it more at the time, I just felt entitled and bored if I’m brutally honest.

  30. I had friends who always got a check from University. It was the ‘extra’ for living expenses from their loans. I was always a little confused as to why I did not get anything. Turns out that my parents would just subtract from their tuition check this ‘extra’ amount. All living expenses were mine to cover with the money I earned from my work study and summer jobs. I canceled my first year loans after I received a $5K scholarship at the end of High School. The end result was I graduated with less than $15K in loans, all of which were subsidized by the federal government.

    I think the decision to attend a school depends on my many factors including the school that you are attending. I was an out of state student at a public university (known as a ‘public ivy’). The finicial aid package was one of the reasons I attended that school versus other schools. At the school I attended, my parents and I could pay our contributions without taking out unsubsudized student loans or home equity loans.

    It cost my parents more for my siblings to attend an in-state public university than for me to attend the school I attended. It cost me more because of the student loans, but I wouldn’t have change a thing. The experience I received was worth it.

  31. In fact, I was planning about it. postponing college until you have enough cash for i is not bad at all. The only thing that would make you worry is the time wasted that could have been used for education.

  32. I really disagree with a good amount of this post. First, my university handles loan checks in the exact same manner as yours – unlike you, I did pay pack the loans immediately and did not spend an extra penny. Just because you were too immature to understand that you would need to pay back your loan doesn’t mean that all 18 year-olds are!

    I graduated with about 25K in loans – I worked 3 jobs all through school and my master’s tuition was $20K which made it hard to pay cash for the master’s (almost all the loans are for the master’s). However, starting salary was over $50K. I am still in my master’s program (last semester) and me and my husband have paid off over $8K of those loans since June (when he graduated!) We will be debt-free by May 2011.

    I worked 3 jobs all throughout school. I watched my money and made smart decisions. I obviously had more money sense than a lot of students, but honestly, stupid people make money mistakes all throughout life (bad career choice, too much house, no retirement savings, no emergency fund). The fact is that people who don’t educate themselves about money, whether they are 18 or 65, will be in a bad money situation. And my parent’s never educated me about money at all or said anything about money to me!
    Also, keep in mind that I had a life-threatening emergency surgery during school that cost about $20K after insurance, which set back my loan payments quite a lot!

  33. Very interesting post. I like the idea of going to a community college to knock out the gen eds that most colleges require. another way to look at college tuition is not how much it is but how to get someone else to pay for it without having you go into debt. Look at the military, peace corps, or americorps. The military has the GI Bill, plus a host of other veterans benefits later on in life. The Peace Corps has some scholarships and grants for after you complete your service, plus it gets you out in the world and experience new things. ditto for Americorps. If I could do it all over again, I would have joined the military for three years, used the GI bill to go to community college for gen eds, then transfer to a good school for major specific classes/graduation. I would have graduated with a degree, no debt, 3 years military experience (helpful for resumes), and a whole lot better off fiscally than my fellow grads. just my opinion

  34. This is without a doubt one of the most rediculous and dumbest ideas ever. Under no circumstances should you ever postpone college, especially if you are wanting to do it to avoid debt. Working so hard that you cant enjoy your college years/dont go because you are making decent money will only lead to regret later in life and greatly reduced earnings. Suck it up, take out the student loans, enjoy your college years and pay them down quickly. Going to a community college doesnt hurt to keep debt low but the valuable connections and experiences lost in those two years probably wont be worth it.