Many people dream of graduating from college and moving into that picturesque American lifestyle: An interesting job. A marriage. A house. A speedy car. Kids, a dog and trips to the coast on holidays. And then it hits, the student loan payments show up in a burning red bill every month. Student loans can be dangerous and cause the suspension of that picturesque life for many, many years. Be smart about student loans.
This spring I considered taking out $100,000 in student loans so I could attend the University of Chicago. Looking back, I think I must’ve been crazy. Luckily I investigated further and realized the burden that would place on me for many years to come. It’s important to know a few things about student loans before plummeting into what could potentially be long-term massive financial burden.
After you fill out the FAFSA and/or CSS Profile and get your EFC (expected family contribution) from the school you plan to attend, you have to figure out how you’re family is going to afford it. Many people turn to student loans to fund their education.
Let’s say I’d decided to take that $100,000 loan out for University of Chicago. At a 9% interest rate, I’d be paying about $900 a month for twenty years and the amount owed would have more than doubled because of interest.
It’s important to realize you are going to have to pay back your student loans. It may not bother you now, but you might regret it if in four years you’re making student loan payments for hundreds of dollars each month. Do you plan on buying a house or a car soon after college graduation? Want to be able to take a fun job even though it may not offer the best paycheck? Student loans could prevent you from having these opportunities after graduation. Use a student loan calculator to gauge the burden student loans will place on you. Don’t forget you’ll be paying back more than the loan—there’s interest to consider.
According to this article, there is over $7 billion of student debt nationwide and half of it is over 10 years old. Increasingly, people cannot pay off their student loans and it’s catching up with them. This article talks about how many people cannot afford to start businesses, save for retirement, get married, buy homes or start saving for their own kids’ college educations. The article opens by describing a 19-year-old pre-pharmacy major who expects to have over $150,000 in student debt when he graduates. And I have trouble paying back my parents when I borrow money for the movies…
Be realistic. Is it worth exchanging a lifetime of freedom for four years of fun? There are ways to get around student debt serfdom. Check out this article for some ideas.
Student loans are scary. Plan accordingly.