Once the interest kicks in it can add a lot to your loan. When you break down the numbers and look at the percentage of your payment going to principal and percentage going to interest, it can be quite disturbing.

Here’s the breakdown of how much each payment goes to interest vs. principal in the first 6 months of a $10,000 loan at 7%:

About half of each payment is going straight to the lender in interest payments and barely making a dent on the loan’s balance.

Seeing these numbers may persuade you to increase your loan payments in order to pay less interest over time. But how do you figure out how much extra you should pay towards your loan every month?

Here’s a guide to help you decide how much extra you can afford to pay towards your student loan every month.

First, organize your loans by the size of the interest rates. Open a spreadsheet and list all of your loans, the principal, the minimum payment, and start with the highest interest rate on top. Anything over 5% is a priority for accelerating payments.

Find out how much each loan will cost you in interest. Use this student loan calculator and plug in the specifics of your loans. How much will each loan cost you in interest if you just pay the minimum? Write this number down in your spreadsheet.

The cost of a loan is misleading. A $5,000 loan at 6.8% with $50 monthly payments ends up costing $6,904 – with $1,904 in interest.

Mark your loans as high, medium, or low priority. High priority loans will be anything above 7% because at this point you’re better off throwing extra payments at your loans instead of investing. Paying off a loan gives you a guaranteed return on your money where as short-term investing is dangerous.

Medium loans are anywhere from 3-7%. Investing will trump paying extra on these loans because their rates aren’t devastating. Eventually when your high priority loans are paid off, you’ll start paying extra on your medium loans because you’ll end up paying thousands and thousands in interest if you just pay the minimum for the loan.

The low priority loans are below 3% and you’ll only pay the minimum on these unless you stumble into a large sum of money. These are your favorite loans because they’ll cost you very little in interest and you’ll be able to set up automatic payments and forget about them.

Before you pay extra on any high priority loans (>7%):

1. Have an emergency fund in place. If you live on your own, this should cover 3-6 months of living expenses. You can’t risk losing your job and having no savings so make sure you have a sizable rainy-day fund insuring your job. If you live at home, you can get away with having significantly less in your emergency fund and paying off your loans earlier will be easier.

2. Invest enough in your 401k to get the company match. If your employer offers a 401k with a company match, you need to take advantage of it. This is free money and shouldn’t be avoided, even if you are carrying high interest loans. You’re young so starting your 401k off now is beneficial for compound interest.

3. Look at your income and see how much you can afford to pay every month. Even an extra $50-100 a month will speed up the process and save you tons on interest in the end. If you hate loans, you may want to put as much as $250 extra towards your loan payments. If you’re content with your loans, then $50 extra is sufficient and will allow you to build up your savings else where.

Before you pay extra on your medium priority loans (3-7%):

1. Have an emergency fund

2. Max out matching 401k contributions at work (free money)

3. Max out your Roth IRA. The 2010 tax year allows you to invest up to $5,000 in a Roth IRA. This is money you won’t be taxed on when you withdraw in retirement, so max this out before you start paying off any medium priority loans because the market historically returns 7-8% (although this is never guaranteed). Starting your Roth now will allow it to grow exponentially faster when you’re older and you’ll be glad you started your Roth at 25 instead of paying an extra $75 towards your loans.

You can invest up to $5,000 but you can also invest any amount lower than that. You have until April 15th, 2011 to invest in a Roth for the 2010 tax year.

4. When the above 3 are complete, pay an extra $50-100 on your medium loans (3-7%). Start with the highest interest rate and work your way down.

Before you pay extra on your low priority loans (less than 3%):

1. Have an emergency fund

2. Max out 401k to get the company match

3. Max our your Roth IRA

4. Start building up specific savings goals (car, house, grad school, baby, etc.). The twenties are an expensive time in your life with a lot of huge purchases. Having extra cash around in your savings account will be beneficial. Open up a sub-savings account at your online bank to help save for specific goals.

5. When the above 4 are complete, pay an extra $50 a month for your low priority loans. At this point, you’ll be financially steady and you’ll end up savings yourself some extra cash by paying down these loans as well.

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Although student loans are an annoying burden that we all want to get rid of immediately, it’s important to take care of other areas of your financial life first.

Here’s a student loan calculator that allows you to see how much extra payments will help your debt situation. You can also figure out credit card debt within the same calculator.

Debt affects people differently so your priorities might be different from my suggestions above. But accelerated payments if you have the funds will save you tons on interest in the end. Run the numbers and get a system going for knocking out your student loans earlier so interest doesn’t dominate your life for the next fifteen years.

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A new p2p company that I was recently introduced to is Vittana.

Vittana wants to get people around the world to college.

In America and other developed countries, it’s fairly normal to receive large amounts of aid and student loans to help finance college. Unfortunately, under-developed nations don’t have access to these funds and if a family doesn’t have money, the student is often left with no college options.

This is where Vittana steps in. They provide microfinancing to students in underdeveloped nations so they can go to college.

Students apply for loans and then get approved by Vittana. You can search for students based on country, loan amount, area of study, or status of loan.

You can make a loan of $25, $50, or your choosing. 100% of your money goes to the student as Vittana pays for its workers and operation strictly through donations and angel investing.

Once the student raises enough to cover their college costs, they will continue with their education. Once he or she graduates and gets a job, they will start to pay back the loan. Some students who may work part-time jobs while going to school may choose to pay back the loan sooner, but you can expect the loans to take a couple of years to be paid back.

To ensure the safety of the loans, many of the students must have co-signers on the loans in case they default. Historically, Vitana’s default rate for loans is less than 3% so your money is pretty safe.

The Loan Process

The sign-up process is painless. They offer one of the most bare-bones member sign-ups I’ve ever seen – it took less than 20 seconds to make myself an account.

After you have your account, you can search for students. Since Vittana’s new, the choice of students is pretty small, so it’s easy to find a student to make a loan.

Once you choose a student and decide how much you want to loan, you’ll be sent to PayPal and you can make the payment.

That’s it. Vittana will keep you updated on how the student is doing in school and on the payback of the loan – much like Kiva.

This is a terrific use of peer-to-peer lending and something I hope will become even more popular as their name gets around.

I donated $25 to 2 students in Paraguay, so I challenge you to make a difference with your money as well.

Although Vittana is young, they’re off to a great start, so help a student out today!

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Last Thursday, I interviewed a British filmmaker who had traveled to Kyoto on a whim, and ended up meeting his future wife and starting a new life.

Continuing with the theme of unconventional ways of moving abroad, today I bring you an interview with Brandon, an American who now lives in Germany where he’s currently a research assistant at a University.

Brandon and I discuss life in Germany, differences from American society, and suggestions for how you can move abroad and become a research assistant.

Austin: What’s your name and job position?

Brandon: My name’s Brandon D. Percle and I’m a research assistant at Ilmenau University of Technology in Germany.

A: How did you get to Germany?

B: My first contact with Germany came in the summer of 1997 when several members of my high school German class from Chattanooga, TN, took a trip to one of Chattanooga’s sister cites, Hamm. We spent a little over 3 weeks in the country, visiting with our host families and traveling around a bit. This whet my appetite for Europe and Germany in particular.

A year after that, I embarked on a full exchange year to Germany (1998-99), living with a family and going to school, being fully immersed in the culture and learning the language. This was my 11th grade year.

After that, I finished high school and began university in Chattanooga (UTC). During my studies, I began preparations to do another year abroad. However, I decided instead that where I really wanted to be was in Germany again. So I applied to a Germany university (TU Ilmenau) and exmatriculated from UTC. Since the semester in Chattanooga ended in May (2002) and my studies in Ilmenau wouldn’t start until October, I did a summer internship at a large German company. My first degree in Ilmenau was completed in 2007 and I have remained at the university since then in the doctoral program and as a research assistant.

A: Can you tell me a little about your school?

B: The Ilmenau University of Technology is a smaller university in the former East that specializes in scientific and technical fields, with an emphasis on mechanical engineering, mechatronics, electrical and electronics engineering and computer science. Like many institutions with a size of less than 10,000, the University has a rather intimate atmosphere with a low professor-student ratio. This is one of the many aspects that attracted me to it.

A: How did you find the job?

B: While working toward the German degree “Diplomingenieur” (engineering diploma, approximately master’s equivalent), I had been studying under the tutelage of the professors of metrology since my 5th semester, including doing the two required year-long projects and my “Diplomarbeit” (diploma thesis) within the Institute of Process Measurement and Sensor Technology. While finishing the thesis, my professor offered me a doctoral/research assistant position after graduation, which I happily and gratefully accepted.

A: How long have you been in Germany?

B: This stay began in May 2002. I had previously stayed in Germany for one year from 1998-99.

A: What’s your previous travel experience?

B: I have little travel experience outside of the US and Germany. I have otherwise only been to a few European countries (England, Scotland and Switzerland). I hope to finally get to France, the Czech Republic, Italy and Poland soon, time permitting.

A: What’s your average day like?

B: I have been working as part of a large team on a research project called the Nanopositioning and Nanomeasuring Machine. As such, my responsibilities involve programming microcontrollers, digital signal processors and regular computers. I also perform measurement experiments in the laboratory and do some of the minor design work. This all means that I have a standard 8-5 working day on most days.

A: Does the job require German skills?

B: Almost all communication in house is done in German. I do however assist everyone else in the Institute when it comes to correcting or even translating articles into English for conferences.

A: Do you have a salary?

B: I have a standard full-time university research position, including pay and benefits.

A: What’s the hardest thing financially about Germany? What’s the best? What bills do you have? What is the cost of living?

B: The amount of income tax in Germany is comparably higher than the US. Several everyday items are more expensive, as is fuel — the latter significantly more. On the other hand, fresh groceries are less expensive for example. In general, I don’t find a big difference in cost of living between where I live in Germany and where I lived in the US. Living in the biggest cities in the US would be more expensive of course.

As far as the best thing about Germany: socialized medicine. (I am of course admitting my opinion on the hot-button issue. ;-) ) The same applies to Canada, Great Britain, France and many more places. I do not have to worry about very many health care expenses beyond my monthly insurance premiums. The costs I would carry on my own are cosmetic or other “unnecessary” procedures. But I don’t have the worry that a sudden procedure will ruin my family financially.

As far as bills, we have pretty much the same bills we would in the US as renters: rent, electricity, internet, cable etc.

Here’s an interesting tidbit about the German rental market that I particularly like. Leases of indefinite duration are much more common here. We simply have to give three months notice before moving out.

A: Have you sent money home? If so, was it easy/difficult?

B: I send money to my US account about once a quarter using an online currency trading account. It has competitive rates and very low costs. Highly recommendable. Here’s a link to the company I use: xe.com

A: Who would you recommend the job to?

B: Anyone interested in a semester abroad or even a graduate program should definitely consider coming to Germany. The research is top notch and it’s a great place to live in general!

A: Do other foreigners work at the school?

B: I share an office with a guy from China and our Institute also has a Ukrainian employee and several students from Russia.

A: What do you enjoy the most about Germany? What’s something you will never forget?

B: I don’t think I can pinpoint one thing that I most enjoy; there are many little tidbits that make up my desire for living here. I am fascinated by the dichotomy between the “work hard, pay attention to details and especially be punctual” attitude of most Germans during the working day and the “eat, drink and be merry” atmosphere of the local bar after work or after classes.

I love the fact that my city is almost five times as old as the United States. I’m a big fan of bratwurst, sauerkraut and many of the German beers (especially wheat beer). The lack of speed limits on many sections of the Autobahn is really nice, too.

Of course, many things are similar to the US, naturally stemming from the fact that the US is European in origin. But one incident from my exchange always reminds me that I am still living in a different culture than the one I grew up in.

About a week into living with my host family, I was sitting at the dinner table with them and my host brother had his left hand under the table. His father became annoyed and scolded him a little, saying “Hands belong on the table!” My first thought at that moment was imagining my mother were scolding me, except that it would have been the exact opposite: My hand would have been on the table and she would have warned me to get it off.

Like I said, it’s the little things that add up to make a huge difference in the end!

A: What are some resources for people who are interested in what you’re doing?

For some general information for Americans coming to live in Germany, I highly recommend the AmCham Germany site: www.amcham.de. Another site for Expats is www.toytowngermany.com. Specifically for studying in Germany: www.study-in-germany.de and www.daad.de.

The sites have information about scholarships and grants as well, but public German universities do not have high costs other than living expenses. The attendance fee per semester runs in the neighborhood of 100 EUR ($133) or so and some states have begun assessing an additional 500 EUR ($666), but not where I live. Generally, students do not have to buy textbooks (there is no bookstore per se, rather a copy shop), just a collection of lecture notes for each class. This too keeps the costs down compared to an average American university.

Finally, the website of the university where I work is www.tu-ilmenau.de.

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Thanks to Brandon for taking the time to share his story. It’s really cool to see someone create such a close connection with a country outside of their own.

If you liked this interview, check out my chat with Luke – the British filmmaker living in Kyoto with his new wife.

Have you ever been to Germany? What did you find interesting about German life?

Photo: Kecko

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In college, my girlfriend and I inherited a textbook business from a friend. We bought and sold textbooks on campus for 55 weeks and made $4,909. We not only made more than every person working an on-campus job, but we learned about the ins and outs of running a part-time business.

There are a million and one ways to save money, but sometimes it just helps to make more than your $9/hr job pays. That’s where a side business comes in. You don’t need to be 35 with a business administration degree to start; you can be 19 and a music major, 23 and unemployed, or 48 and happily employed with a family.

For the posters, we created 3 or 4 versions that were right to the point and tried to catch a passerby’s eye with a headline like: “Get More Money for Your Textbooks” or “Tired of the Bookstore’s Prices?” since we knew that the majority of our customers would be disgruntled bookstore customers.

We made sure the poster had rip-off tabs with our names, email, and phone number available so the customers wouldn’t forget about us after a long day around campus.

Email was a much easier marketing channel, but unfortunately only lasted a little while. All students had access to an email list of their respective dorms. We used our two email lists, and then talked some friends into sending emails on our behalf from their dorms. It felt a bit spammy, but it paid huge dividends and most of our customers originally heard of us because of email.

Eventually, the dean of students got word of this and politely threatened to shut us down if we continued soliciting with the help of the school’s email. We politely agreed.

After getting our initial round of marketing, we made our first $300 the 3rd week of the term.

How We Stayed Organized

We used our own money to initially pay customers, and after the first year found that opening a joint checking account to keep up with finances was the best idea. We always had loose cash around and were owing one another, so this made that situation much easier.

We opened a free college checking account at the local big bank in town that was a 1 minute walk from our apartment complex. It cost us nothing, provided a debit card for USPS purchases and ATM withdrawals, and took away a lot of the hassle of day-to-day business activities.

To sell our textbooks, we created an Amazon account and linked the joint checking account. When we would sell a book on Amazon, the funds would go back into the checking account we paid people out of. It worked perfectly.

To keep track of expenses, we kept a spreadsheet that allowed us to track the money we paid to customers (listed as payments), and the money we brought in through Amazon sales (revenue).

The most important step was setting up a shared Gmail address so that our respective inboxes wouldn’t be overflowed with extra emails from customers and Amazon sales. Gmail works great for handling large amounts of incoming mail and contacts.

The Buying & Selling Process

85% of our money was made through Amazon. We both had previous experience with Amazon, and found that the size of their marketplace blew away competitors like half.com.

In our print ad, we asked for the customer to send us the ISBN (international standard book number) so we could look up the exact edition they owned since there are so many variations of textbooks listed on Amazon.

When a customer would email us with textbooks we would go right over to Amazon and type in the ISBN of the textbook and up would pop the price of the book, how many were available, and any other information we needed.

After some testing, we found that offering 33% of the Amazon price worked best for us. It made us enough where we didn’t resent the work, and it still was enough to offer the customer at a price that almost always beat the bookstore (our main goal, and only competitor).

We found 33% to be accurate because we had to take on the risk that the textbook might not sell when we bought it from a customer. But over 2 years, we sold around 90% of the textbooks we bought.

Once we agreed on a price with the customer, we would meet them in a public place on-campus and exchange money for the textbook(s). It was kind of shady sometimes, but it always turned out fine. We would then immediately post the book on Amazon at, or near, the lowest price in the marketplace.

A majority of the books sold within 48 hours.

Shipping

The buyer on Amazon paid $3.99 for shipping, or $6.99 for expedited. Amazon then took 10-15% commission, which was worth it since they were providing us a huge amount of buyers.

We shipped the books through the local USPS. After testing multiple shipping methods, we figured out that the USPS flat rates were the best deal. We would pay $4.80 for a normal size book, or $9.85 for a larger book. The price seems steep, but we lost a couple of books in non-USPS sponsored packing, so the extra $5 was worth the security.

After the book arrived at its destination, the funds were transferred to our account a few days later, and then we could send them to our checking account to buy more books from other students.

Here’s how an average sale broke down.

Child Development textbook listed on Amazon: $44.99

Paid to customer: $15

Sold for: $44.99

Amazon’s commission: $5.35

Received from Amazon: $39.89

Shipping: $5.64

Profit: $19.25

That was how we made over $4,600 in under 55 weeks of work. We tried some other variations of the business that brought in another $300, but the process listed about was our cash cow for our junior and senior years.

6 Tips to Run a Side Hustle

- Try everything and be willing to fail multiple times. This was the first time either of us had run a business and a majority of the time we spent throwing around ideas that never saw the light of day. Realize you’re going to make mistakes. That’s normal. Just learn from them and improve. We spent way too much money on shipping for year 1, but learned of new shipping options and spent 25% less on shipping in year 2.

- Stay organized from the get-go. Corinne is to thank for this. She started the spreadsheet and we quickly realized that not only did having everything organized make it easier to run the business, but it allowed us more time to think of new ideas to implement. Opening the joint checking account was the best thing we did because it did away with the stress of sharing money.

- Keep notes to track your progress. We kept detailed notes from the start. This allowed us to see exactly how much we were making in real time. Here’s how our sales compared from year 1 to year 2. In 2009 we were around for 3 terms, compared to just 2 terms in 2008, but no one had books in the fall so it was slow and didn’t affect the numbers much.

- Your good customers are the best marketing tool you have. Everyone loves complaining about the bookstore’s prices so we figured people would probably tell their friends about our business if we gave them a good price and treated them nice. We asked customers to tell their friends and implemented a referal system our second year to promote this. We gave $5 to the referrer for every $30 worth of books their friends brought to us. We even tried gift cards for a while to see if that promoted people spreading our name to others. Be nicer to your customers than you would to your mom, and they’ll help you out along the way.

- Don’t try to be perfect. If you wait to long to launch because you want every detail sorted out beforehand, you’ll never launch. We quickly learned that the condition of the books didn’t matter as long as it wasn’t destroyed. We learned people really had no idea how much textbooks were costing them at the bookstore. We learned that the people who work at the USPS can be really lame sometimes, but you have to be nice to them so they don’t throw your book away. You’ll learn the tricks of the trade later on, but get started now and work out the kinks later.

- Try and test new ideas. I had the genius idea to buy textbooks for people. That way we didn’t have to use our own money. We would just be a personal shopper. It worked out okay, but we ended up spending almost $1,300 of our own money to only make $1,700 – netting us just $400. Mixed with the amount of time it took – it wasn’t worth it. No sweat. We dropped the idea and moved on. We also tried expanding to another college down the street – sold one book to a teacher and that was it. No biggy. We tried renting books to people. No go.

Failure happens in business. Find the stuff that works and make sure your failures are not catastrophic. The referral system was one of these ideas that worked and it brought us hundreds of dollars in revenue.

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It was a lot of work, but running this business taught me more about the real world than most of my college courses. It was also a lot of fun. My parents gloated to their friends, we were featured in the school newspaper, and we made some nice cash for doing something we enjoyed.

If you go to a big university, there’s no reason you couldn’t make over $10,000 with the amount of textbooks and people floating around campus.

But maybe you don’t want to sell textbooks. How can you use the tips above to start your own side hustle? What problem can you fix for others? It doesn’t have to be a career, but there are opportunities to be found. The worst thing to do is underestimate your skills, so get out there and see what the marketplace has it store for you today.

Photo: yumyumbubblegu

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The savings I managed to come up with blew me away. I actually looked at the total and thought no one is going to believe that number, but it shows how much money can be easily wasted if you don’t pay attention to where it goes.

These are tips that can easily be implemented in your life and the savings that follow will allow you to stop worrying about buying the new Madden or a dinner at a nice restaurant.  Hopefully you can take these tips and plug the money holes before it’s too late.

Here is my money saving list:

1) Avoid the cafeteria and buy groceries

My school was on trimesters (three, eleven-week trimesters a year) and each term cost $889 to eat on campus, or $2,667 a year. I had a meal plan for three years and my senior year finally wised up to the savings I was missing.

By shopping at the discount grocery store, Aldi, I spent only $25 on groceries per week. I’ll admit that I went out because I didn’t want to cook everyday, but I only spent around $25 every week going out. Also, based on the complaints I heard EVERYDAY about cafeteria food, I assume  people who have meal plans go out just as much, if not much more, than I did. For the sake of the numbers, I’ll add $25 a week to the school meal plan total. My total for food every term came out to roughly $550. Compare this to eating at school for $1164 a term!

School Meal Plan               Buying Groceries

$1,164/term                                        $550/term

$3,492/year                                         $1,650/year

4 years: $13,968                                4 years: $6,600

Total Savings: $7,368

This is the graph I wish I would have seen before I stepped foot on campus my freshman year. With so many students leaving college with piles of debt, it becomes even more important for students to take advantage of these savings. This money could be used towards student loans, car payments, or a house payment instead of stuffing yourself with more buffet style food.

2) Buy Textbooks Online and Use the Library

Saving money on textbooks became a bit of a unconventional hobby in college for me. It was a big-ticket item that I quickly learned people were wasting thousands of dollars on. By avoiding the bookstore’s outrageous prices, I saved over $2000 on textbooks in college.

I used methods like purchasing from online book sellers, buying the edition down, and utilizing the school’s interlibrary loan system. These were simple methods that allowed me to save loads of cash in college, and I was able to leave school with minimal debt.

I noticed a lot of people in college complain about not having money, but these were the same people who were spending $200 on a Marketing book they were only going to read three times.

I wrote an e-book about the 8 steps I used to save money on textbooks in college and you can read it here. It includes specific sites I used, descriptions of my methods, and spreadsheets to keep your savings organized. I also wrote about my two favorite textbook saving tips in a guest-post that ran last month at the Frugal Dad. That can be read here.

Total Savings: $2,000

3) Open an Online Savings Account and Put Away $10/week

This is something I wish someone would have made me do the second I started college. I didn’t discover online savings accounts until last year and the thought of missed interest accumulation keeps me up at night! Not really, but it still irks me that not enough people do this.

The best part about online savings accounts is they actually pay interest. Due to the recession, interest rates are pretty low right now, (ING is at 1.4%) but ING has been as high as 4% in the past. These are as good or better than CD rates and your money is easily accessible, compared to a CD which charges you for getting to your money before your maturation date. Putting away just $10/week is not oppressive to your social life and is something a majority of college students can easily do without. Your post-college self will be appreciative of your effort.

Online savings accounts are great because after you link your checking account you can set up automatic transfers. Just schedule $10 per week to be transferred and forget about it. I mentioned in the post Get the Money Snowball Rolling, that starting is the hardest part. By opening an online savings account at ING, FNBO, HSBC, or anywhere that will give you interest, you’ll be ahead of 98% of the people your age. Total Savings: $2,189 *Based on a 2.5% interest rate over 4 years* Utilizing these three savings tips can save you $11,557 over your college career.

By paying attention to the big savings, you can stop stressing over the price of your morning coffee or the price of going out with your friends this weekend. You can finally afford to spend on those little desires because you now have an extra $11,557 in your checking account. College is a time for personal growth in all areas of your life, but it doesn’t mean you have to sacrifice your financial future for these experiences.

Set these three steps in motion and get on living.

Photo: Dimitry B.

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