Practically every article on debt involves student loans. That’s due to the fact that there is a serious student loan crisis here in America and chances are, you are living in that crisis right now.
It’s no secret on here that I’m against debt – any form of debt including student loans and credit cards. Of course, everyone has their arguments about student loans being “good” debt and a great “investment” in your future.
But here’s the thing – when you “invest” in your future with money that isn’t yours, you’re not really “investing” in anything. Because in order to properly invest you must invest with your own property. That’s a textbook definition of investing in its most general form. You can’t invest with something you don’t own because that’s a recipe for disaster – loan sharks anyone? You’re basically hoping and praying that can pay back the money borrowed along with the interest it accrues as well as hopefully earn something on top of that borrowed money.
My mom tried to warn me against this investment, “you shouldn’t finance something that isn’t a guarantee.” What my mom was saying to me is that you shouldn’t take out a loan for something that you don’t even know if you will earn. And most college students don’t finish college in four years if they ever even finish.
Had I been more patient and taken my mama’s advice I could have avoided the whole student loan debt thing.
I could have…
- Applied to scholarships like it was my fulltime job.
- Worked and saved while attending a community college for my general education courses.
- I could have waited to go back to school until I had saved up the cash to go.
- I could have lowered my class load so I could afford to pay in cash for my education.
- I could have asked my parents to transfer my savings account (that they had set up for me from my birth to save money for me) to an ESA or 529 while I was still in school.
- I could have NOT blown the money from the above-mentioned savings account when I was 19…
I had options. And you have options, but they’re probably not options that you like. I get that, because the reason I took out student loans was that I was impatient. I wanted my degree right then and there.
Heck, I was a non-traditional student because my first go’round with college ended with me flunking out because I decided that living the rockstar lifestyle was more fun than going to class. And did I mention that the first round of college was a free ride? I had a scholarship and all!
But I was too busy “enjoying” life to take advantage of it. So when I finally came to my senses and decided that I wanted to go back to school, I impulsively took out student loans because that’s what all my friends were doing.
I didn’t want to listen to my mama. I was about to be a newlywed and I knew all about financial hell so I thought I could handle this responsibility. But the truth is, student loans are the devil. They are one of the hardest debts to pay off early and the government makes it a challenge to get rid of them.
So, before you go and take out those loans – ask yourself if it’s worth it in the long run. How much can you afford on your current salary to pay every month? Because if the answer is $0 run like a crazy lady fleeing a burning building from student loans. You simply can’t afford them.
When my student loans took effect, they were more a month than the car that I was currently paying on – over $500! And my student loan balance was just below $30,000 which is on the low end of student loans. I pulled money out of savings as fast as I could to pay the balance down to lower the monthly payments and even though I put “apply to principle” on the check, the government didn’t do that.
When I called and asked why, they explained that is not how they work. When you take a loan from the government, you are agreeing to ANY payment you make first being applied to any fees owed (there are always fees – not just late fees), the interest, and then the principle.
It was my wakeup call that these loans were going to be a challenge to pay off and that I was going to have to get creative to get them paid off in less than 10 years. We made it happen in 2 ½ years but it was far from easy.
Related Post: How We Paid off $5,000 of Debt in One Month
Every payment had to be calculated at just the right time of the month and day on some of the loans in order to avoid paying the most interest. So if you decide that you want student loans, don’t go into this agreement blindly thinking that you’re making some great investment in your future. Know that you’re agreeing to incurring thousands and maybe even hundreds of thousands of dollars that you will have to pay back. Student loans are like taxes – they must be paid. They will not go away in a bankruptcy and they will not roll off your credit in seven years. So, if you think there’s a way out – there’s only one way and that is to pay them back – in full.
And parents, please do not think that if you take out student loans for your child so they can “afford” to go to a private college that you are doing them any favors – unless you plan to be the one responsible for paying back those loans. I have a few friends whose parents took out enormous student loans so they could attend private colleges with the agreement that the child would pay off the loans after they graduated and got a job. Despite all of these friends making well over six figures a year, they are struggling to afford their loan repayments.
I don’t want that for you or your children. If you decide loans are right for you, then you need to educate yourself and pay on those loans while in school. You’ll thank yourself later, but hopefully you’ll have the patience to wait until you’ve saved enough money to pay in cash.
Hindsight is always 20/20.
What advice can you give someone struggling to pay off their student loans?
Grab the workbook and start building a budget that works today!
The hardest part that I struggle with regarding student loans is that there is no collateral. If you make a mistake with a house, you can sell it (even if it’s under water). But student loan debt is the one type of debt that you cannot get out of, and you make that decision at such a young age. I’ve paid off $85k but I still have so far to go. I am so glad I have the skills of being a lawyer, but I regret the debt 100%.
That is such a great point Natalie!
Another big scam is the auto-deferment. I went to grad school on scholarship but was also working and wanted to pay back the loans from my undergrad. NO matter how hard I tried, they would not take them out of deferment! They did once and then the following month they were back in deferment again!
My only choice was to remember to pay every month…which didn’t last long. Over the years it has accumulated Thousands extra in capitalized interest.
Student loans can be such a terrible thing too since most degrees are pretty worthless.
Oh yes! My best friend is in that crazy mess of auto-deferment right now. It’s insane how challenging and confusing they make the whole process. :-/
Great article. I agree a lot of what you are saying. I think it is difficult for those who want to be doctors or require longer schooling. Most people don’t have $100,000 saved for schooling and most parent’s can’t afford to pay for their kids schooling especially for 8 years. I think it just depends. If you are planning on going to school to be a doctor, you really are investing in your future because that is a serious commitment. I think if you don’t really have an idea of what you want to do, you should work until you actually know what direction you want to take and save money for the education.
I graduated debt free and my husband did not. He will be the first to tell you he took out money he didn’t need. It might have taken him a year longer to go without loans and he might have had to live with family instead of paying for a house with a bunch of his friends. He made bad choices and it took us 8 years to fix those mistakes.
I never thought that I’d have to pay my student loans (I thought my parents would pay them), so I didn’t work as hard as I could have to find scholarships. I would like to think that I would have if I knew I would ultimately paid.
I definitely could have gone to college without school loans, but I didn’t prefer one way of not paying to another. I think it’s important that a kid feels that *they* are responsible for their school costs.
I’m very thankful to be school-debt-free for a year this month.
I would love to know how you paid off 55,000 of your debt in 2 years. I have 65,000 in student loans and if I could set up a better budget I would love to know how! This is great to know people can take their debt. You make email me at edundore33@gmail.com. Thanks so much. Enjoy reading your blog daily.
Erika
Hi Erika! It took a lot of hustle, patient, prayers, and diligence to pay off that debt. I walked dogs 5/week for years to help boost our debt payoff plan and my husband took every odd and end job he could. We also used sites like Swagbucks, eBates, and Inboxdollars to help us generate a little extra payoff money. This post here, has more info on how we managed to pay off $5,000 of debt in one month. I hope it helps! 🙂
I made (what I consider) a mistake when I decided to go to grad school. I was able to finish my undergraduate degree without having any loans. But, took out loans when I decided to go to grad school.
I think grad school is great … if there is a specific job that you want and can’t get it without an advanced degree. It’s even better if you work for an organization that promotes from within, provides tuition reimbursement, and you are all but guaranteed the job once your graduate degree is completed. I would consider that an investment.
I wish I had realized I didn’t need to go to college right out of high school. I mean, that’s when everyone goes, right, so that is when you SHOULD in the eyes of everyone around me. I graduated high school at age 15, and being only sixteen was too young, in my opinion, to start racking up debt and studying for something I didn’t know what it was! Even eighteen is too young. I wish I had delayed college for about six to eight years. (In that case I wouldn’t have gone because I have never had a job working outside the home.) I also didn’t realize the face that college degrees are not created equal and I would have spent time studying the average salary people with certain degrees earn. I likely would have decided on another field entirely.
I don’t regret my college experience because it really helped me grow up, get out of my comfort zone, actually make friends, and grow in my faith (the schools I went to had awesome campus ministry programs).
But what really has made me mad was when I was in college all the professors had these “sales pitches” where they’d say if you graduate with this degree you’ll get a job out of college making $40,000 a year. Then the economy tanked and then it got better but not much and I can’t even find a job making $12/hour let alone $20/hour. And forget about PTO and health benefits.
People have told me I should go back to school and get my CPA or masters in accounting (my undergrad is in business and I have an associates in accounting) but I just don’t want anymore debt and even at that many times I feel like I have all the education and none of the experience to do what I want to do.
Sorry for the rant the whole system is so messed up right now I pray that one day I’ll be able to dig myself out of the mess that I’m currently in. :/
Yay! A fellow Accountant! 🙂 I have my bachelors in Accounting but have foregone the CPA route. Several of peers went the Masters and CPA routes right out of college but they still aren’t making very much money (even the ones that went and worked at the Big Four). Have you thought about freelancing out some bookkeeping? That would at least allow you to have “experience” on your resume even though you’re not working for an actual employer. And you’re totally right about the professors – either they have no clue what the job market is like in the real world or they’re just dishing out bad stats. 🙁
Wow! I have A LOT of thoughts about this because I have massive student loans that are really impacted my life and I’m not technically using my degree at all as a Stay at Home Mom. I agree to apply to Aid is a full time job. I regret that there were many options that I could have done to cut my loans by 2/3 to 1/2 but I wasn’t brave enough to question “conventional wisdom.”
As the daughter of a college professor, I do think that where you go to college matters. College is a community. There is a “fit” that happens. I’m able to make the brave, fearless leaps to follow God because I joined certain healthy educational communities from age 18 to 25. I’m calmer about being a Stay at Home Mom. I’m able to really put the Pope’s words into effect.
Debt is a piece of the equation, but it’s not the only piece.
Also, I know this sounds radical, but poverty–when done by choice, not compulsion–is a holy virtue for Catholics. The good thing that came out of my student loans was that it forced me into budgeting and into “healing” financially from my Middle Class Mindsets. I wasn’t there in terms of faith–like following St. John of the Cross or the Little Flower when I started mothering. But I was forced to make good grocery decisions, good school decisions, good housing decision–because of my debt load.
I would just say that God can use any situation for good. If you are in debt, and there isn’t a clear way out, don’t despair. It’s an inch by inch recovery process. Life is more beautiful because the climb out of student loans is a steep one for many of us who got a little sucked into the lie of overly expensive college and graduate school debt.
How did you determine what day to actually pay for the student loan in on?
I had to manually calculate the interest and discuss the different days and times with the student loan company (NelNet in my case). Basically, I just kept asking questions until I got a round about date and then started calculating the interest. It took a few weeks to figure it all out.
My husband and I took out student loans, but we tried to be smart with them! He did two years of community college and two years at a private college. I did 4 years at the same private college, and my grandmother gave me money she had been saving for me to pay off 2 of my 4 loans when I graduated.
We have been saving and paying them off carefully. We both lived with our parents for a year after graduation before we got married. After being married for almost 9 months, we have only 8k left. It’s not the best way to do things, but I’m proud of how we’ve handled everything.
That is an awesome way of handling your student loans Alex! Congrats on making such a huge dent in ’em! 🙂