How To Avoid Student Loan Mistakes

Think Beyond College

Smart use of your money and your credit in college will enable you to spend the money you earn when you graduate on things you really want like a new car, a nice apartment or house instead of all of your income going towards debt repayment.

A short story from a graduate that experienced the journey follows. If I knew at 18 what I know at 28, I could have prevented so much disaster from happening.

Instead, I owe $150,000 to student loan companies with no escape. I hope that you will read this before you fall into this trap. Don’t say I didn’t warn you.

At 18 college was a dream come true. I could study real-world topics without parents to monitor my class attendance, my coffee intake, or my late-night slurpy runs to 7-11 with friends.

I had worked part-time as a teen, but had no savings or significant sense of financial responsibility. Nor did my parents, which led me to finance a private school liberal arts education in my native Southern California with student loans.

I qualified for some federal money. The rest of it would come from private loans. I paid for room and board, books and gas for dad’s car that got me around. A few thousand lattes later and some new clothes each semester, the bills started to add up.

So it was impeccable timing when the credit card solicitors hit me. Finance charges and interest rates, what’s that? These concepts did not matter at the time to me. I graduated four years later with $150,000 student loans and $11,000 in credit card debt.

Avoiding Loan And Other Financial Mistakes

Use your student loan money to finance your education, not your lifestyle. Tuition, room and board, and textbooks are smart ways to spend your student loan money. You’ll be paying these loans off for the next ten to 20 years, so use the money wisely.

In addition to student loans, the average college student has four credit cards. In the first year of college the average debt was $2,169 on these cards. At interest rates of 15 to 18 percent, you may be paying off this credit card debt into your 30s and 40s.

The way you handle your credit card debt will follow you for many years. If you max out your credit line, don’t pay your bills on time and keep collecting credit cards to add ways to obtain money, you’ll have a very poor credit score after you graduate. This will affect everything you do when trying to purchase what you want.

A budget helps you plan ahead by knowing how much money you have coming in and going out. It gives you the power you need and the peace of mind of knowing where your money is going.

It’s really not important where you spend your first two years in college. Attend a community college while getting your general education requirements out of the way, and then transfer to the school of your choice. This way you can work and not take out any loans.

You’ll save tens of thousands of dollars, which you’ll appreciate when you are trying to pay off your student loans after you graduate and find that money is stretched.