There’s a phrase you may or may not have heard - “If you live like a CEO when you are a student, you will live like a student when you are a CEO.“ This is speaking to borrowing wisely. Student loans are available to students up the cost of attendance for their respective school. This can include everything from tuition to books to housing and transportation and more.
Depending on your individual situation and financial circumstances you may be offered more money than you need, and it could be tempting to take it, but don’t. Before you accept any student loan be sure you fully understand what you are getting into.
The Debt is Real
Graduation may seem years away and accepting a check today could really help out as extra cash to go on a trip or upgrade your wardrobe but know that the money you borrow today will have to be paid back after graduation, and in the case of unsubsidized student loans, it could cost your more than you borrowed.
Each year you borrow federal and/or private student loans your grand total adds up. At the end of four-five or maybe six years when you finally graduate you could be shocked at just how much you really borrowed. Each year that 5, 10 or 15 thousand loan may have seemed relatively harmless at the time, but if after graduation you find you know owe tens of thousands (the average graduate has almost $37K in student loan debt), that could have a dramatic impact on your financial situation and quality of life when those payments start to become due.
The Debt Can Impact Future Decisions
The average graduate makes between $50 and $60K in their first job after college. Accounting for rent, utilities, food and maybe a car payment there may not be enough to cover a student loan payment of potentially several hundred dollars each month.
This financial hardship could prevent or delay your purchasing a home, starting a family or something else you may have been dreaming about. You might find yourself wishing you could have warned your past self not to borrow a penny more than you absolutely needed. And if borrowing was in fact, unavoidable, you may be thinking you could had made different decisions about college due to the cost.
The Debt Can Impact Your Credit Score
Once you start making payments, those payments get report to the credit agencies and your credit is either positively or negatively impacted depending on if you make on-time, payments in full or if you are chronically late or even miss payments entirely.
Your credit score is important. If you want to rent a place to live, get a credit-card, buy a car, or even get a job, your credit score will be considered. It’s a testament to your financial responsibility and when you are looking for trust from a prospective landlord or employer or lender, they want to know you are someone they can rely on. Don’t underestimate the value of a good credit score.
Make Interest Payments if You Can
If borrowing is unavoidable, as it is in many cases, then make every effort to borrow smartly. Only borrow what you absolutely need and no more. Borrow from the federal government first and only from them if you can, as they offer more borrower benefits and repayment options than private student loans.
If you have any unsubsidized federal loans or private loans, do your best to make interest payments if you can while in-school so you can keep the principal from growing and ultimately costing your more. If you can make more than the interest payment that’s even better and if you can’t cover all the interest, know that whatever you can send will only serve to reduce the total amount due when repayment begins after graduation.
School Can Wait if Need Be
Some students fear that if they don’t go to college right after high school they will not go at all. Truthfully, you should not go to college until you know exactly what you hope to achieve there (i.e. your major and career goals afterwards). If you don’t know these things with some degree of certainty, then it becomes a very expensive exploration both in terms of time and money.
Community college is a great place to go to not lose momentum, knock your general education credits out and maybe even work part-time while you figure out what it is you want to pay tens of thousands or more for to get a degree in.
Working can be a very smart choice. You may find something you thought you’d love you don’t, and you actually enjoy something else more. It’s better to find this out while getting paid, then after paying a lot for a degree you don’t think you’ll ever use. Unfortunately, colleges do not offer refunds. All sales are final so shop smartly.
Shop Smartly When Choosing a School
When you have clearly decided what it is you want to do, be sure to choose the school that is going to best help you achieve your goal. Brand name is great for bragging rights, but at the end of the day, your paycheck from your career will matter to you more.
Look for a school that has a great program in your major where you will learn what you need to be successful. Look for a school that has a strong alumni base as these people can be integral in helping you get your foot in the door if need be. Look for a school that has a great recruitment effort. Its easiest getting a job when prospective employers for your job come to the school looking to hire than if you go out and pound the pavement after graduation.
At the end of the day, going to college and choosing which one to go to will be one of the biggest financial decisions in your lifetime. Even though you are young, you can still be smart about it and with the help of your parents and others to guide you, you can make a decision that best sets you up for success