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Student Loans.


Your 30 year old self will thank you if you say NO to student loans.

...But it’s impossible to pursue a degree without taking out loans! … that’s what many people claim.

I am aware of the costs of college. Been there, done that. I completed my undergrad coursework and then pursued a master’s degree and an additional degree. I took out about $8,000 in federal student loans while working on my undergrad (regret it - especially since I didn’t truly need it - I took it because it was available and made life a little easier). I know how it feels to be a broke college student - working a part time job, with 15 -18 credit hour semesters. I know that the cost of college tuition keeps rising at an alarming rate (more on that in a minute). I am not proposing that it’s EASY to avoid student loan debt, but it certainly CAN be done. And SHOULD be done. We all need to stop believing the lie that student loan debt is just ‘part of it’.

First, some stats to consider:

  • The amount of student loan debt in America = 1.3 TRILLION dollars (2016). Yes, that’s trillion with a ‘T’.

  • This debt is held by 44 million people with an average debt of roughly $34,000 per individual. That dollar amount is up nearly 70% over the last decade (YIKES).

  • More than 2 million student loan borrowers have student loan debt greater than $100,000.

  • None of the above stats account for all of the education related credit card debt Americans hold. (Stats from NY Federal Reserve)

So, how can an individual earn a degree but avoid becoming one of the millions of Americans with student loan debt?

Step one: Choose a college/university that you can truly afford. If you can’t afford your “dream” school, don’t try to make it happen by swallowing huge amounts of debt. Start your coursework at a community college or a more affordable school. Community college in TN is now free - take advantage of it if necessary. Also, choose a marketable degree; making a poor choice could lead to underemployment. And, we'd all be better off to realize that a traditional 4 year college/university is not for everyone. Trade schools and vocational training = great fit for lots of folks. One year certificates land good jobs for many just like 4 year degrees do. Different types of education/training allow a variety of skills to be brought to the marketplace!

Step two: Scholarships are worth your time! How do you know what aid you are capable of receiving until you apply for it? You don’t have to be the valedictorian or a super-star athlete to be awarded scholarship money. Fill out lots of applications - start early! Every little bit that you are awarded helps in the long run. Of course, Pell grants can help significantly too - but they are needs based.

Step three: Save what money you can before heading off to college. And no, I’m not just talking about working the summer before your first semester in college - but yes, you should do that if at all possible. I’m also talking about saving the cash you get from aunts, uncles, friends, cousins, parents, etc. as gifts for graduation. And, what about working while you are a junior and senior in high school and socking away some of every paycheck for future college expenses? Save what you can before the time rolls around to head off to college!

Step four: Work. There is absolutely nothing wrong with working a job while in college. Believe it or not, statistically speaking, students that work a part time job generally maintain a higher GPA while in college than their peers who do not. Is working a part-time job while carrying a 12 -15 credit hour workload fun? No. But neither is paying off huge amounts of debt in your 20s, 30s, 40s, etc. Work and save big chunks of that money to pay for textbooks and other college related expenses that you will incur. Work every summer while you aren’t in school... And be diligent about tucking away lots of that paycheck so that you can afford your fall and spring semesters.

Step five: Don’t give in to those around you that try to convince you that the “college experience” is a priority regardless of cost. I hope college is an enjoyable experience for all, but is the “college experience” really worth facing tens of thousands of dollars of debt in just a few short years? That’s a question you have to answer for yourself. Please don’t be naive though. Wisdom = considering the long term impact of decisions not simply living for the here and now.

Don’t just take my advice - talk to others. Find someone older than you who attended college and ask the following questions:

How long have you been paying on your debt?

How much do you still owe?

What would you rather be spending your hard earned money on?

Has student loan debt added stress to your life?

If you got the chance to do it over, would you have handled paying for college differently?

Just ask a few people, listen to their responses, and heed their warnings.

If I can’t convince you to avoid student loans, okay. I know how tempting it is to use someone else’s money now knowing that you don’t have to pay it back for a few years. But let me say this: limit, limit, limit. Limit the amount of student loans you take out --- PLEASE!

  • Student loans should not be used to fund wanderlust adventures.

  • Student loans should not be used to fund shopping sprees.

  • Student loans should not be used to fund bad habits or vices.

If you do take them out, do NOT choose to take the full amount offered. Only take out what covers your tuition and expenses DIRECTLY related to education. Hopefully, you have parents that will guide you through this process - someone who will be honest and tell you when you are forgetting to consider the long-term effects of your decisions. After all, every dollar you borrow MUST be paid back...sooner than you may realize.

One other thing to think about - College tuition rates keep rising - at rates that are mind blowing. Why?

One big reason for the crazy increases: our access to federal student loans. No, I’m not saying it’s the ONLY reason that college tuition rates rise, but it is a huge reason. If the federal government keeps increasing the amount offered to individuals to pay for their education, colleges can charge more because students aren’t using their own money to pay the bill. If federal loans weren’t in the picture, many colleges and universities would be forced to lower their tuition rates -- the forces of supply/demand and competition working their magic. The government serves up student loans as assistance and it seems like such a big help… but please start paying attention to what historically has happened when too much assistance is offered. Long run = not helping people, but damaging their futures. It might “assist” you in the short term, but in the long run does it really? It’s like a parent handing a teenager a credit card with a $20,000 limit and no payment requirement until 4 years after the first purchase. Terrible idea from a parent’s perspective, right? Why is it any different when considering student loans?

And here’s what happens to many - while your 35 year old self is trying to make a house payment, buy groceries, pay the electric bill, maintain health and auto insurance, raise children, etc... guess what other big debt you’ll have hanging around your neck -- student loans. “Normal” in America means having credit card payments, a mortgage, and vehicle loan payments. Do you really want student loan payments added to that mix?

Stop and think before taking out student loans.

And if you already took out student loans and are currently working to pay off that debt, you should start by doing this: sit down and arrange all of your non-mortgage debts (credit cards, medical bills, student loans, vehicle, etc) in order from smallest to largest amount owed. Then, start attacking the smallest debt until it is GONE. Then, take what you’re paying on the smallest debt and start attacking the second debt on your list. This is the Dave Ramsey plan referred to as the Debt Snowball. It made a difference for us. Once we got some momentum going, we were dead set on getting rid of debt. You should check out his plan!

I’ll leave you with some important points to consider:

  • Student loan debt is not “good” debt. (Current interest rate on federal loans is 4.45%) No debt is good debt - sorry.

  • The interest rate on federal student loans may be lower than the interest rate on a private loan. But please remember that the government is not trying to do you a favor. Tons of money will still be made off of the backs of young people trying to earn a degree.

  • A student loan is a financial contract. Any money borrowed must be paid back - even if you don’t complete your degree.

  • There is a REALLY good chance that you won’t make as much money as you expect to make when you get your first job after college. All that money you plan to use to repay the loan may not even exist.

  • Student loans - a type of credit which the lender doesn’t have a clue whether or not you will be able to pay it back; your credit "worthiness" is not even considered before loaning individuals thousands of dollars. Hmmm…..

  • For federal loans, repayment begins 6 months after graduating or leaving school. Be ready.

  • If you do have student loans, pay ON TIME and make extra payments (on the principal) to save on interest.

  • It is nearly impossible to bankrupt your way out of federal student loans.

  • Many young people trying to get a mortgage for a home are having a harder time because of their debt to income ratio - too much is owed on student loans. This is not my opinion but based on statistics offered by the Federal Reserve.

  • Additionally, the amount owed on student loans keeps many from being able to save a solid down payment for a home. Not having a solid down payment will lead to PMI and/or higher interest rates on mortgages because you are more of a risk to the lender without a solid down payment.

  • Many are also delaying investing for retirement because they are too strapped making student loan payments. Delaying investing for retirement because you are paying for your past = not an ideal situation. So busy paying for the past... wouldn't it be better to be working towards your future?

Thanks for reading! Feel free to leave any questions or comments below!


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