Until recently, I had been in debt since I was 18. The moment I decided to go away for school, I had already signed my life away to Sallie Mae. I didn’t know what I was doing. 18-year-olds should not be allowed to make these types of decisions. All I knew, was that I wanted to attend a highly recognized college. I came, I went, and I conquered. What I conquered, was major student loan debt. Over $30,000 of debt before I even had a job. Six months after I graduated, Sallie Mae called me to say, that she has been patient enough, and now wants her money back with interest.
Like the saying goes, “hindsight is 20/20.” My father tried to convince me to attend a local school and commute from home, but I wanted the full college experience. Which, I received with a whopping price tag. There are a lot of other students in similar situations. Good students coming from working-middle class parents who, may have been wealthy enough to attend college, but not to pay for it outright. So naturally, they examine their financial options, and student loans somehow seem like the right thing to do. A way for a broke college kid to make their big dreams come true. While attending school, it almost feels, at times, like you’re going to school for free. You aren’t worried about where your tuition is coming from because Sallie Mae is taking care of it. You don’t have to worry about anything, except for your G.P.A.; that is… until you graduate.
6 months after you graduate, your student loans become due, and you officially become one of the 73% of Americans who are in debt. It’s crazy how capitalism works both for us and against us. We receive a great education, and greater opportunities, but we also become a slave to the lender. Their mission is not to help people afford a great an education; but rather to make huge profits. And student loans are very difficult to pay off. What makes student loans so hard to tackle, is the daily compounded interest. That means that unlike a credit card where the interest is charged to you monthly, Sallie Mae and friends charge interest on the balance EVERYDAY until it becomes paid off in full. This means that there are some graduates who will be paying their student loans for close to 30 years!
In the US, higher education is seen by the middle and lower class, as an investment to a better, more lucrative future. And I agree, but at what cost? It is estimated that there is more than $1.2 trillion of student loan debt in the US alone. Corporations and colleges alike, are cashing in on the desire and naiveté of young students. No one is explaining to students, how negatively student loans can affect your financial future. Both parents and students need education regarding the financial implications of taking out student loans. So, I put together 5 tips for college students and their parents when considering college payment options:
- Understand that you have options. You don’t have to take out student loans. It is possible to pay for college outright.
- You can take advantage of grants that do not require repayment.
- You can get a part-time job and take advantage of financial aid through the school. It may take you longer to graduate, but as you increase your job experience, you can get better jobs, which will pay more money. When you graduate, you won’t have any student loans to pay off, and you’ll have amassed lots of work experience.
- For parents who don’t mind switching jobs, if you can get a job within the university system, some employers will pay for your education and that of your dependents. My mother worked for the University of Maryland system, and therefore, I was able to attend any state school, tuition free. This doesn’t include room and board, so choose a local school and commute from home. You may want the freedom from nagging parents, but in four years, you will be able to move out debt free.
- If you do decide to get student loans, only take what you need to pay for school. Don’t use refund checks to buy clothes, electronics, or even pay rent. Live at home if you must, or get a part-time job to cover expenses, and send the refund checks back as credit toward your loan. Getting a $2000 refund check from Sallie Mae may seem like easy money, but remember, once you graduate, there will be interest tacked on to those amounts that will compound DAILY, for the life of the loan. Getting a $2000 overage check every semester totals to $16,000. It will seem stupid to you as an adult, paying off $16,000 of debt from your old college years, just because you wanted to eat take out every night and watch a big screen TV. That debt could hinder you from being able to afford a nice apartment or house in the future.
- When you graduate from college, don’t be in a rush to move out of your parent’s house. If they are generous enough to let you stay, then do so. Use that time, before you start paying your own living expenses, to pay off your student loans. Do this first! Don’t get a car loan or rack up any more debt during this time. Buy a little hooptie if you need to get around town; but make paying off your student loans your main priority. This will save you from A LOT of burden in the future. Paying off debt takes much longer if you have a mortgage, and a family to support. So, do it now, while you’re young, single, and without bills.
- Choose your major wisely. While we all would love to major in something we’re passionate about, but we must be realistic about the job market. Majoring in something like Canadian Studies or Puppetry Arts, may leave you without a well-paying job. Some majors may seem like an easy “A” but paying off $30,000 worth of student loans on a $15 per hour job, is going to be challenging. I suggest doing your research on your chosen major and see how the job market is for that field of study. If it seems too broad or too narrow, or if the pay doesn’t justify the debt, you may want to select a different subject.
- Choosing the right employer could help you pay off your loan quicker. Some employers will pay off your student loans in exchange for time worked. Other types of employment, such as government jobs and non-profit organizations may qualify you for loan forgiveness. Go to https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service to read about the details and see how to qualify.
As of today, I have finished paying off my student loans…early. That’s right, paying off your student loans in 17 years is considered early for some. I could have been paying them off for another 10 years. I paid them off, along with a lot of other bills because my husband and I made a conscience decision that we were going to be debt free, finally. I managed to pay off my last $12,000 in student loans in a few months. We skipped vacations and lavish date nights, and instead opted for “Netflix and chill.” We passed on the weekend getaway invites from friends and family, and really focused on our financial freedom. I couldn’t help but to think during this time, how much easier it would have been if we would have known more about personal finances when we were new graduates, or better yet, before we entered college. Don’t make the same mistakes we did. Paying $560 a month for 17 years is a burden that could have been eliminated a lot sooner had we been financially savvy. College is a wonderful experience, being in debt is not. Be smart with your money now, so you don’t have to pay for it later.
Until Next Time,