Since student loans are considered to be a necessary way to attend university for so many students and their families, there’s often a sense of resignation when it comes to how much will need to be borrowed. With higher education being so expensive, what choice do you have, right?
Actually, you do have a choice – several of them. But it will be important to act on those choices either from the very beginning of your university education, or shortly there after. Think long and hard about the implications of the following…
Student loans will have to be repaid
Well, that’s just too obvious, isn’t it? Maybe not.When students enter university – bubbling with optimism about an unlimited future – it’s hard not to assume that they’ll have the necessary resources to pay off even large student loans shortly after graduating. But that kind of thinking can easily land you in Student Loan Debt Hell.
Here’s a cosmic reality of debt: borrowing is easy; repaying is not.
And here’s another cosmic reality: your earnings will not be unlimited when you graduate, especially in the early years!
While you might make a healthy salary upon graduation, there will be other demands on your paycheck. There will be income taxes to pay, a retirement plan to fund, a new apartment, and the every day expenses like food, utilities, gasoline and entertainment. After paying for all of those, you may not have as much money to pay toward your student loan debts as you believed when you took them.
Give careful consideration to what else you will have going on in your life when the bill for your student loans finally comes due. You may not have as much money as you expect.
Rehearse that possibility in your mind before signing up for any student loans. It can be sobering.
Student loan debt will be a drag on your adult life
As a result of all of the above, it’s more than a remote possibility that your student loan repayments will drag on well into your adult life. In the process, they may even compromise that life.
Long after your university years begin fading into memory, you may still be servicing debt from your school years that could impact your ability to get married, start a family, buy a home, or take a job doing something you love at a lower rate of pay. If your student loan debts are high enough, they could see you doing a financial juggling act well into middle age. That may even force you to change some major life’s goals that you have.
Related: Repaying Student Loans Part 3 of 3
Never borrow more money than you feel – and can reasonably project – that you’ll be able to pay off within a few years of graduation. That may mean setting a limit of $30,000 in debt rather than $80,000. But though that will force you to change your plans now, you will be freeing yourself of having to make tougher choices later when the stakes will be even higher.
Keep student loan debt to a minimum
OK, it’s great to say that you should keep your student loan borrowings to a minimum, but how exactly do you accomplish that?
By making trade-offs!
You’ll be making trade-offs all your life, so now is an excellent time to get started. Don’t fall into the trap of thinking that your university years are some magic time of reckless abandon; the bill will come due soon enough.
Here are some trade-offs to consider:
Keep the loan amounts consistent with expected earnings. You shouldn’t be borrowing $100,000 to fund an education that will land you a job paying $35,000 upon graduation. Even if your income moves up quickly, that will still be an enormous burden to carry early in life.
Arrange at least some pay-as-you-go strategies. The more you can pay for your education now, the less you’ll have to borrow and pay for later. Plan to work a part-time job during school, or even full-time during the summers to at least cover some of your living expenses.
Consider less expensive schools. A lot of emphasis is placed on the value of a degree from one university to another. That’s fine if you can afford the more expensive school out of your own resources. But if you have to borrow to cover the difference, you seriously have to ask if it’s a luxury that you can afford to carry. In addition, there is mounting evidence that the major you are in has more weight than the university you attend.
Commute at least for a year or two. Room and board add significantly to the cost of a university education. If you can avoid these – at least for a year or two – you’ll need to borrow far less. Look into going to school close to home so you don’t need to live on campus.
If borrowing money to pay for living expenses is a bad idea throughout life, it isn’t any holier when you are in school. It’s one thing to pay for your actual education once you graduate, but quite another to be paying for old living expenses.
Don’t get wrapped up in the student-loans-are-good-debt mind games. Once you’re out of school, they’ll be debt – period. You’ll have to pay them back one day just as you will any other money you borrow.
Never ignore that fact when you’re in school and running up the debt.
Do you ever worry that you may be taking on an amount of student loan debt that will have a serious negative affect on your future?