Runaway Checkbook

 

College Loan Mistakes

 

It is a fact that most college students must take out loans to be able to pay for college.  If you are in college or have been to college, you know how expensive it is.  The mistake many students make when using loans to pay for college is they are also living on those loans.  In other words, they are also borrowing money to pay their living expenses while attending college.  This would not be quite as bad, but they are entertaining themselves and buying things they want (versus need) using loans.  This is the problem.

 

Living costs at many schools are higher than tuition and books.  So, a large percentage of student loans go to pay for living and discretionary expenses.  Students leave college with huge loans relative to the income they are capable of earning.  No one seems to be guiding them through this process.

 

There are numerous statistics that show that students with college degrees earn more than those without degrees.  However, I recently read an article that calculated the number of years a college student has to work to pay off their loans.  This article, in summary, showed how a student with a college degree and loans does not earn more than a student without a degree for many years while paying off the loans.

 

Here's my point: do NOT use school loans to live on!  Borrow money for the tuition and books if you must, but find a job to pay for living and discretionary spending.  This is not easy, I'll admit.  It may require you to finish school two or three years later; however, two positive things will occur.  One, you will undoubtedly spend less money on living and discretionary things.  Two, you will exit college with significantly lower loans, which you will pay off much quicker.  In addition, many kids these days graduate from college without ever having held a job.  Working while attending college will give you invaluable experience that many employers will appreciate.  In fact, you could try to get internships in areas of interest, which will also help you find employment once you graduate.

 

Think of school loans as a LAST resort.  Realize that these loans will be a significant burden on you when you graduate.  Keep them to a minimum.  If you must use loans, then get a job while attending school.  Work every chance you can. 

 

Parents, you were paying something for them to live at home with you, so when they go off to college, anything you can give your student to live on will help them.  I do not feel parents should feel guilty if they cannot afford to help pay for college, but any help they can give is a good investment into their child's future.