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Financial Literacy

How Today's Teens Can Become Tomorrow's Millionaires

Student loans are just a part of life, right?

Since, obviously, you can’t go to college without a loan . . . or can you?

The reality is that many college students (and their parents) never even think about paying for school on their own. It’s just a foregone conclusion that they’ll be filling out the FAFSA form and looking for a loan.

But, stick with us here—what if you really can go to college without debt? Imagine the type of jumpstart you would have on your financial future! Twenty years from now, what will your life look like simply because you weren’t strapped with thousands of dollars of debt the moment you graduated?

The truth is—you can get a college degree without student loans.

And here’s why you should avoid student loans:

The Average Cost of Student Loans

Let’s walk through a possible scenario:

The average student with loans graduates with nearly $30,000 of debt, according to The Wall Street Journal. Think about that: You’re 23 years old, you’re looking for your first career job, and you’re already $30,000 in the hole. No pressure!


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The monthly payment on a $30,000 balance would vary based on the repayment plan, but a reasonable figure might be around $200 a month. That might not seem incredibly high, but it will still be one of the larger monthly bills for a new college graduate making an average of $45,000 per year.

And $200 per month is just a reasonable estimate. The higher the balance, the larger the monthly payment will be. It’s not unheard of for a new graduate to have more than $100,000 in student loan debt. Think about that monthly payment!

The Actual Cost of Student Loans—Not Investing Early

So where does the "becoming a millionaire" part come into play?

What if, instead of sending that $200 per month to Sallie Mae, you were actually using it to invest?

Over the course of 40 years (from age 23 to 65), that $200 a month would turn into more than $2.5 million! On the other hand, let’s say you’re on a 10-year repayment plan and start investing when you turn 33. That’s only 10 fewer investing years. Not bad, right?

Well, only if you don’t mind losing a whole chunk of money. If you invested $200 per month from age 33 to 65, you would retire with just over $800,000.

That is the power of compound interest. By getting started 10 years earlier and letting that money sit and gain interest, you’ll have $1.7 million more at retirement. And get this: Over the course of those 40 years, you would have only contributed $100,000. That means compound interest did almost all the work. How cool is that?

Now, this is just a really basic example that assumes you invest the same amount every month for 40 years. Most people don’t do that—because as you get older, you tend to make more income. And as you make more income, you can invest more—which means you would retire with even more dollars in your pocket!

Avoid Student Loans and Become a Millionaire

So the moral of the story here is that student loans set you back. Not only do they take away from your income, they take away from your future.

Stay away from loans at all costs. By doing that, you’ll take the first step toward retiring as a millionaire!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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