First off, this post is intended to address cadets at Service Academies (West Point, Annapolis, USAFA, and Coast Guard) AND any ROTC cadets at, well, normal schools. Basically, anyone who is getting Uncle Sam to pay for their undergraduate education.
We all know cadet life ain't easy. As I mentioned, both Mr. FIRE and I graduated from the Air Force Academy, so we know that between academics, athletics, and military activities, cadets are sprinting the whole four years. In some ways, ROTC folks may have it even harder: they get to see the average college student chillin' through college and STILL have to get up early to march or do PT. I'm not sure I could have hacked that -- but that's really neither here nor there.
As hard as cadet life is, there are HUGE bonuses to it in FIRE terms. First, you're going to graduate without student loans. That's a big deal and is what this post focuses on. Second, you're getting PAID the whole time you're in school. Yeah, I know, it's like $80/month...but still, it's getting paid for just doing your daily job. (More on the cadet paycheck HERE). Third, many of you will be offered a loan before you graduate. Getting close to $40,000 at interest rates less than 1% is no joke....and I've got a whole post on whether to take it (spoiler: yes!) and what to do with it HERE. Perhaps last but most important, you're going to graduate with an automatic job that pays well, is difficult to be fired from, offers the world's best health benefits and built-in cost-of-living adjustments, and contributes to your retirement.... as well as a network that will help you outside the military should you choose to leave after your time is up. Not too shabby -- almost makes those four years worth it, right?
Ok, let's get back to the first benefit I mentioned: student loans. According to debt.org, "Student loan debt is accelerating so fast that it has become a burden on the U.S. economy....student loan debt rose for the 18th consecutive year and borrowing for higher education has doubled in just eight years." Total U.S. student debt is over $1.4 trillion (that's TRILLION), meaning students rack up debt at $2,858 per second. The average student loan debt in 2017 was $37,172.
Why has this happened? Partly, it's because college costs have gone up between 241% (private institutions) and 344% (public universities) since 1980. That's more than even gas prices over the same period, which went up only 200%. And more and more people want and NEED to go to college: a college degree gets you access to the highest paying jobs in our country, so much so that a college grad can expect to earn up to $1.3 million more than high school grads over the course of their career. Add these factors together -- college is expensive but you almost have to go -- and you get over 70% of college graduates entering the workforce with massive student loans, 30% with debt over $30,000.
Which brings me to you, cadets. Some of you sort of generally understood the value of not paying for college, but let's put a finer point on it. ROTC awards scholarships that cover tuition and some fees/expenses, often in excess of $100,000; that's in addition to an annual allowance and money for books. The service academies value their education even higher: USAFA pegs the number at $416,000 but estimates range from $250,000 to $600,000. So you're getting an Ivy League quality (and cost) education... for free.
Now, I know the jokes: it's not free, because you're paying for it in blood, sweat and tears, or having it shoved up your @$$ one quarter at a time. But let's be real. Compare your situation to your fellow college grads. Debt.org does the following analysis of the monthly and lifetime cost of student loan debt:
If a 2016 graduate took the standard repayment plan for the $37,172 borrowed – 10 years, at 4.29% interest rate – they would be paying $382 a month for the next decade. Experts estimate that you will need a starting salary of $47,000 to afford to pay off the loan if you remain single. If you marry, that number goes up to $52,000.
In all, you will pay $8,607 in interest and a total of $45,779 for the privilege of earning a college degree.
So you, dear cadets, are not only getting an Ivy League level education for $0, you are not going to be saddled with paying the equivalent of a hefty car payment for the next 10 years of your life. This is going to open a ton of doors to you -- marriage, home ownership, rental assets, retirement planning, and of course FIRE -- that your contemporaries can only dream of. This is just one of the examples of how you're different (and need different financial advice!) than your peers. You are starting out with a massive head start in this race called life..... read more of our blog to find out how to make the most of it!
Perhaps something to think of the next time you're finishing a paper at 0200, watching a football game, or barfing after your PT test! :-)
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