student

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Let’s Talk about Car Loans

Credit & Debt

The cost of a car is bigger than your monthly payment.

(1) Fuel

(2) Insurance

(3) Maintenance

(4) And more . . .

These “costs of owning a car” can add up, especially if they go unrecognized at the time of purchase. Don’t be an unaware consumer on a purchase this large and this important

Did you know?

According to the Federal Reserve Bank of New York, Auto loans are the 3rd largest type of Household debt in the United States. On March 31, 2023, outstanding auto loan debt stood at $1.56 Trillion.

Home loans were the largest ($12.38 Trillion) with student loans second ($1.60 Trillion).

Pro Tip for students:

Understand the “opportunity cost” of your first car purchase. For those hearing that term for the first time, opportunity cost is what you give up

If you have not read The Missing Second Semester, Chapter 5 of the book shares a powerful example, of an 18-year old who knowingly purchases a $10,000 car in lieu of a $13,000 car (that he or she could have afforded) and chooses to invest the monthly difference in her of his Roth IRA. Hint, the “opportunity cost” is BIG!

Find out for yourself how big the $$$ difference is, with Bankrate.com’s Compound Interest Calculator. Hint, the monthly difference of $56 was hypothetically invested in the S&P 500, a 5-year auto loan was used and the student’s Roth IRA grew for 42 years.

Our financial choices have consequences. Positive choices like the one above, can be life changing.

Own your financial future.

Gene Natali

Gene is Co-founder and CEO of Troutwood, a software company founded out of the Carnegie Mellon University Swartz Center.  He is a Chartered Financial Analyst, board member of CFA Society Pittsburgh, Executive in Residence at the Black School of Business|Penn State Behrend and a part-time lecturer at the University of Pittsburgh, where he has taught Personal Finance since 2015.

Prior to founding Troutwood, Gene spent 17-years personally working with some of the largest and most sophisticated institutional investors and retirement plans in America.  He is an award-winning author (The Missing Semester), has spoken in over 1000 unique high school and college classrooms, and regularly keynotes investment and education conferences across the country. 

Gene holds an MBA with a concentration in finance from Carnegie Mellon University and a bachelor’s degree with a concentration in economics from Allegheny College. 

The Missing Semester
The Missing Second Semester
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3 lessons learned talking 1:1 with 25 high debt college students

Student Loans, Uncategorized

FEAR around student loans is real, and justified

I recently had the opportunity to spend 30 minutes talking one on one with 25 college seniors, all of whom had student loans. The students I met with were sincere in wanting to learn, honest about how they got here and uncertain where to begin.

What were the lessons?

(1) The size of the loan did not correlate to level of fear. Students with lower loan balances had the same level of fear as students with much higher balances.

(2) Student loans were the TOP money concern.

(3) There was very little understanding of “variable interest rates,” yet most had variable rate debt.

Where do I start if I have student loans?

It was surprising how many of the students I met with did not know their total loan amount, interest rate or where to go to find this information. This is important data to have. Knowing what you owe, helps you build a plan to repay it.

Step 1 = Keep your student loan information organized in a safe place.

It is difficult to optimize a plan for student loan repayment, if you don’t have or know all of the pieces. Troutwood has built a “debt rank” feature that helps to solve this issue.

What are variable interest rates?

Federal student loans have fixed rates that DO NOT change over the life of your loan. Private student loans can be fixed rate or variable rate. Variable rates DO change over the life of your loan.

When broader interest rates rise, the interest rate on your variable rate student loan also rises.

The same if of course true when interest rates drop. Interest rates have risen sharply over the past year, and I don’t believe many students were aware of the impact this would have on their monthly payment.

What if I’m still in High School, how much can I borrow?

This is an important, but personal question, and the answer differs for each of us.

The more important question to ask is how much should I borrow?

The last 10-years have taught us that while different degrees and occupations equate to different income potential, student loans are treated equally.

Debt is a legal obligation and must be taken seriously. Tools like the Federal Student Aid Loan Simulator exist to help you make informed decisions around student loans. Take time to understand both the opportunity and the impact.

Own your financial future!

Gene Natali<br>
Gene Natali

Gene is Co-founder and CEO of Troutwood, a software company founded out of the Carnegie Mellon University Swartz Center.  He is a Chartered Financial Analyst, board member of CFA Society Pittsburgh, Executive in Residence at the Black School of Business|Penn State Behrend and a part-time lecturer at the University of Pittsburgh, where he has taught Personal Finance since 2015.

Prior to founding Troutwood, Gene spent 17-years personally working with some of the largest and most sophisticated institutional investors and retirement plans in America.  He is an award-winning author (The Missing Semester), has spoken in over 1000 unique high school and college classrooms, and regularly keynotes investment and education conferences across the country. 

Gene holds an MBA with a concentration in finance from Carnegie Mellon University and a bachelor’s degree with a concentration in economics from Allegheny College. 

The Missing SemesTer
The missing Second Semester
Troutwood