The average student graduated with over $24,000 in student loan debt last year. Though tuition is increasing in many parts of the country, high student loan balances can often be attributed to the student ‘living on the loans.’ This means the student takes out student loans beyond the tuition expenses and uses the extra for their living expenses.
My wife and I learned this the hard way as we added together our school bills. Taking out extra loans to live on pushed our college debt $15,000 – $20,000 higher than it needed to be.
While it’s true that students may need some funds to pay for room and board, they can really harm their financial future if they fall into the student loan trap – paying for EVERYTHING with student loans. Before you make the same errors we did years ago, learn from our mistakes and follow these pieces of advice.
Plan ahead for the bill.
Before you sign the dotted line for that loan, do your homework and find out all the costs of attending school. Your next step should be to seek out all scholarships, work-study positions, or part time jobs available for college students on campus.
Yes, working while in school is difficult and making school payments of $200-$500 each month may be tough, but you’ll be glad you did something to keep the bill as small as possible.
Stick with Federal Loans.
Your goal should be to avoid private loans at all costs. With interest rates ranging from 7% to 12%, private student loans are bad news. If your financial aid, scholarships, and federal loans don’t meet the bill, you might have to use private loans – but do so with extreme caution and try to pay them off as quickly as possible.
Don’t take more than you need.
This applies for federal loans and especially for private loans. Think twice before taking out ‘a little extra’ to buy a car, clothes, or to help with eating out on the weekends. These purchases should be done with money you EARN – not borrow. Student loans aren’t supposed to be a line of credit to purchase anything you want, so borrow with care.
The Harsh Reality
In just six short months after graduation, the grace period will end and your loans will be due. That $5,000 – $6,000 you borrowed each year grew to $20,000 – $25,000 in total and the payments are $250+ each month for the next 10 years!
The unfortunate reality is that students graduate with too much debt and it becomes a ball and chain for the next decade of their life. For some, avoiding the student loan trap may mean choosing a school that is more affordable or taking prerequisites at a community college first.
Finally, the biggest mistake I hear is when students think their income will be high enough to pay down their debt quickly after graduation. Without consideration for everyday bills and expenses, their inflated income expectations are usually put back into reality and they are racing to get out of the student loan trap as fast as they can.
Do you have any advice about getting out of the student loan trap? Or even better, avoiding the trap altogether?
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{ 13 comments… read them below or add one }
I just finished my Master’s Degree at Dallas Baptist University. I think I accumulated more debt there than my engineering degree at UTEP. I did not stop to think about it at the time, until I saw how much debt I accumulated. I am much smarter now. Take the advice in this article. Community college can get you at least 66 credits towards your degree, might as well take those classes at less than half the cost of a University.
My advice would be to go for those jobs that wipe your student debt like low income area teachers or taking jobs abroad. If you cannot find one like that, the federal government has many ways to assist you if you work for them. That is what I am doing currently. Do NOT consolidate right away. Get a plan together right after graduation during your grace period. Find out which loans have the higher interest rate and work on those right away, even before the grace period that way when you consolidate, your overall interest rate will be lower than it would have been. I also believe that you can defer the loans if you submit to military service, plus they can work with you to pay them off also.
Good luck!
I can attest to the slippery slope of student loans. I went to an out of state university and was also the first in my family to go to college so we really didn’t have a good sense of really how much tuition, living expenses, etc. were going to cost. On top of that the cost of tuition increased dramatically from year to year and at that time there was no option to lock in tuition.
I worked part time job and my parents help me out as much as they could, but for the most I used to private loans to finance my education, living expenses and even leisure. It was way to easy to get loans at that time and I ignored the issue that was a mounting student loan bill saying “I’ve alway had good paying sales jobs so I’ll be alright.” Ignoring the issue and saying you’ll deal with it is a really bad idea. Talk to your family, peers, your pastors, graduates, whoever…just have a good idea of what it will cost you and start preparing for that BEFORE you leave for college. The worst thing you can do is leave all of your guidance in the hands of the financial aid office.
The reality…I have had good paying jobs, but a student loan bill of roughly $600 per month is definitely a burden I’d rather not have.
A college education is not a something we are entitled to. It is a gift and it must be stewarded in a Godly way.
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I’m in a master’s on full loans…working full time…plan on finding a goverment job to help offset my loan after graduation.
I think a lot of people assume that when you graduate from high school you have to start going to college full time. I was able to graduate from college without debt by working full time and going to school part time for the past 10 years. Sure, it takes a lot longer but I was able to gain work experience that whole time as well so I’ve been in my industry much longer than others my age which gives me a leg up. Many times I could get my employeer to foot part of the bill and then I could get some scholarships for good grades/being a working adult. The rest I paid out of pocket. After all is said and done I basically got a college education for 75% off.
Great article! College debt and lack of jobs is causing an increasing rate of college graduates to ‘boomerang’ back to live at their parents house.
Great article on not overdoing it with student loans. This is especially important because student loans are one of the few debts you cannot get rid of in bankruptcy. Having a huge number of student loans can really be a detriment to your financial future. Also Federal student loans are one of the few debts where they can take your social security payments to cover the unpaid student loans
Great advice everyone! I hope someone learns from the experiences shared here. It’s easy to think the loans will ‘take care of themselves’ with a great job, but student loans can be a giant burden and strain financially!
As far as avoiding student loans altogether goes, are many ways to go to school without going into debt. However, most of those ways involve work — either work consistently getting top-notch grades and applying for a slew of academic scholarships, or work at an actual job where you either save up to pay for college or where your college will be paid for. Many people just don’t want to put in the effort, and don’t realize the full impact of taking on debt like that until it’s way too late.
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I went overseas for my degree as it was cheaper than out of state. But in this crappy economy I’ve been working crap jobs ever since I graduated (and regretting returning to the States ever since).
My Wife graduated recently as well, and is in the same boat. We are saddled with 2 Degrees worth of debt and barely better than minimum wage jobs (I do bookwork at a Hotel – at which we have housekeepers with degrees – and my wife is a secretary at the hospital).
The biggest advice to give right now is that you need to choose an education that is NEEDED, not stupid degrees that look fun like ARTs/Psychology/etc. Even Nursing is getting saturated in areas due to everyone switching careers.
Make pragmatic choices, or you may regret it for a very long time to come.
Another thing that we can take is the choice of having the school that offers low education fees but high quality of education. There are lots school that offers such standard.
One way to do it, is to avoid college altogether. Analyze the job market. CPAs are now looking for jobs because businesses consolidate accounting departments. There are hundreds if not thousands of unemployed teachers. I remember when people would get degrees in nuclear physics and fear that there would not be a job after graduation due to down turns in the industry. So, they would minor in education because one could always get a teaching job to make ends meet. Those days are over.
Think about it. Instead of going to college, work at Walmart and get a side cash job. Even at minimum wage, you make $25,000. Go to college and you owe $25,000. So, work instead of college and you are ahead $50,000 for each year of college and no debt.
If you are smart and hard working, there are all kinds of jobs that don’t require college. Sell insurance. Become a personal banker.
I’m a retired teacher. My 27 year old son says he is glad he did not go to college. He just bought a house.
A college degree is no longer a guarantee of a job or a well paying job. Universities push the college education. If enrollment drops, then the professors are of work.
I racked up $30,000 in student loans before I was Born Again and a was a lost drunken soul who defer his loans for 10 years while finally just now graduating with a BS Degree at age 42. My loans have accumulated an additional $35k in interest over the years while in deferment. I am now having to face the music of paying off this huge debt bc I decided to take an ignorant path at the time thinking I was invisible. Well now that I am born again and actually see and ackowledge my huge mistake having had taken out these nightmare loans that would eventually come bck to haunt me later in life, I haven’t any choice other than paying back more than double of what I actually borrowed and ride out the nightmare which will be with me likely the rest of my days and retirement. It was a foolish mistake, though am very greatful that I am now saved and have the Lord baring the brunt of this disgraceful debt I have accumulated all bc at the time I thought I was invisible. Believe me you are not invisibe, nor is your forseeabe college loan debt! Stay clear from student loans or at least pay one completely off before u take out another. In His Grip, Keith