Woo. I have a similar issue.. when I went to college, I had NO money to my name. I worked full-time at a call center and going to school full-time at night. I lived in an apartment (I had a dog, so I couldn’t stay in student housing, and I was not about to abandon him) and I only took out loans to cover tuition… not even my books were covered. :/ I’m still $30K in debt and I’m actually looking at going BACK to school now. Trouble is I can’t decide how to pay for it. sigh.

If borrowing an extra $10K increased your living stipend fivefold, that means that you were planning on living on $2500 for the year.

I think I’d rather pay the extra $300/month for ten years.

I did EXACTLY the same thing as you, Trent, with the Student Loans, only I’m still in college and now working on fixing those mistakes before I graduate. It is hard but I know my efforts today will be worth the effort tomorrow! I don’t want to be held back by debt of any kind, not even “good” debt like Student Loans. I don’t want to feel forced into a job that I’m not happy being at just so I can afford to pay the bills. THAT’S exactly why I’m going to college in the first place; to follow my dream and find a career doing something I love. Debt pushes us in a direction of its own called necessity. If you NEED to pay off your debt, you do what you can to make that happen. Chasing dreams becomes much more difficult when debt is dragging you down.

I would guess that you’ve paid those loans off by now, maybe you can write an article about how great that moment felt! :)

$2500 of living expenses per year sounds awfully low.

Didn’t you have some job during college?

Gosh, I am just glad I live in a country where you can go to the best schools (generally, public) without getting into debt.

@Johanna – He may mean “stipend” to be the money left over after paying tuition, and board. In that case – yeah, I could see living on $2500 for nine months, especially in college.

@Ruth: He’s talking about living in an apartment and buying groceries, so it sounds to me like he was not on a room and board plan with the university, and the $2500 would cover rent, food, and all other living expenses (but not tuition). I can see how that would be possible (say, if you packed three sets of bunkbeds into a one-bedroom apartment, ate pasta and ramen all the time, and did nothing else), but I wouldn’t want to do it.

Trent, please correct me if I’ve misunderstood.

My daughter has a friend in her FIFTH year of college, who has taken out “generous” student loans to finance all of it, some of them co-signed by her Grandmother! One day when daughter was grousing about her $50 a month student loan payment, I asked her how much she thinks her friends payments will be, with her debt load. She was absolutely speechless! And if she defaults on some, Grandma is on the hook for those balances! BIG dose of reality!

I would say get the minimum, but have some kind of contingency plan in case something goes wrong. I mean, just like in real life, you need an emergency fund, you need one as a student for when you computer dies or something similar. That’s why taking a bit more than you plan to need can be smart if you can be smart about it and put it in a separate account (ing for example). Or get approved for a line of credit but don’t use it. I have a line of credit right now because often student loans don’t pay out before tuition is due and then I pay it back. Other than that, it’s there for the end of the semester when you are completely broke or for when your computer suddenly dies or something like that.

Marie, you can always take out more student loans. Even considering origination fees, I’d say it makes more financial sense to borrow only what you need and, if the emergency comes up, borrow more then. (Unless of course you’re talking about subsidized money. Then, I say, borrow all you can. That money’s free until six months after you graduate. If you have some self-discipline, it’s stupid not to take subsidized money and sit on it.)

or: Take the maximum possible, live frugally, and pay back whatever you don’t use immediately.

It’s a bad decision to use school funds for other purposes like eating, bar hopping, cigarettes, etc. I remember a friend fixing the engine in his Z instead of paying for a quarter of school.

I don’t know…probably should balance it a bit. I wouldn’t want to try to pass difficult courses while stressing because I live in squalour and can’t afford proper food and have no means of entertainment. Of course $300 more a month for 10 years is probably excessive. I borrowed about $24,000 for 5 years of Undergrad + a Masters degree. It was more than I needed by about $3000 a year, approximately. But because of that I was able to afford to live on my own close to campus and let off steam after exams. My rent is now 4 times what I paid then, but I live in a HCOL area now too.
Bottom line, I think taking on extra student debt to give yourself some creature comforts is okay, just don’t go overboard or you’ll regret it.

One thing my girlfriend is doing is she takes out extra as kind of a *buffer* and if she doesn’t need it (she is very good about controlling spending) she just pays off most of that loan at the end of the semester.

That buffer came in real handy when her car needed quite a bit of work.

Although I was fortunate enough not to have to take on student loans, it’s basically the same story for me. I bought far too many things I didn’t need, and bulked up on furniture and electronics. Virtually none of it I still have, having since sold it for fractions of what I paid for it. When I moved out – same thing – I purchased far too many big, heavy, expensive things like furniture, when in reality I used it a bit for a year or two, and then sold it for a fraction of the value.

My advice to anybody in high school or college – live as lean as possible. After HS/college, you afford yourself far more flexibility on when you can move when and where you want, not having to worry about so much packing/moving. Had I dont it all over again, I would have lived with friends, in small/cheap basement suites, with nothing but a laptop and a couple duffle bags, give or take. I would have been able to do far more travelling (which I like to do), and since I can pack up and move literally on my own within a day, moving becomes painless.

Just like how money equates to freedom, so can mobility, especially when you’re young.

I didn’t even know that financial aid was allowed for living expenses. My financial aid calculation for my second two years of college went like this: “Tuition for the semester is $A, scholarship and grants are covering $B, I made $C over (summer/winter break), mom and dad can chip in $D. Therefore, the amount I need to borrow is $A-(B+C+D).”

I worked random part time jobs throughout the school year, netting me somewhere between $200-300 a month in spending money. I suppose in my case, ignorance was bliss and my total student loan debt was only 4 figures.

I’m joining with those who’d be interested to know where you can live on $2,500/year.

That said, I’m all for avoiding as much student loan debt as possible. BUT, in certain cases – if you’re going into a field where the odds are relatively high that you’ll be able to pay off the amount of debt without a huge problem, for instance – I think it makes sense to borrow more than mere subsistence level. I’m not sure how well I would have done in law school if I had been living in a tiny apartment with 8 other people and eating ramen for every meal; I lived fairly austerely, I can pay my loans okay on my salary, and the extra $300 a month (or whatever) the small indulgences I had cost me were worth it I think.

If people are getting an education for the proper reasons it can be done frugally. The “college experience”, gaining freedom from parents, etc. I don’t think are proper reasons. To become more educated, make good decisions, have the ability to get a good paying job are. I got through college without a cent of student loan money or tuition help from my parents.

*in high school took all the classes I could that also got me credit in college (not offered at my old HS anymore). I needed no electives in college.
*lived at home & commuted
*went to a state university ($12,000 + total)
*earned scholarships with good grades ($2500/year)
*worked full time through the summer and up to 15 hours per week during school through a state internship
*paid 20% of my take home pay to my parents
as reimbursement for my expenses
*paid about $500/semester for 4 years for
books
*purchased a car with a loan co-signed by my parents (built good credit! didn’t miss a payment)
*moved away at 22 with $5,000 in the bank and no debt!

At 30 I work 2 months a year (in my chosen field!)

Do people automatically think student loans are the way to go? Are there others that work their way through school?

This advice is so very important for any young, college-aged readers out there. I did not follow this advice when I was younger, and now I am burdened by an enormous student loan that will take over a decade to pay back. In all fairness, the loan did get me a graduate degree and a well-paying job. But I was very lucky and could have been strapped with an enormous load of debt without the good job to help pay it back! Student loans are not for lifestyle inflation!

@Katie: That’s a good point: If scrimping on your living expenses means hampering your ability to study, you may be shooting yourself in the foot.

@Amanda: That’s fairly arrogant to declare that anyone whose college experience/goals differed from yours is wrong. Sure, there are all kinds of ways to get a college education without taking any loans. Most of them are not applicable to everyone. For example, not everyone has parents who live within commuting distance of a 4-year state university that offers the program they want to study.

I didn’t take any loans for my education either (scholarships covered most, parents and summer earnings covered the rest). But I don’t think student loans are inherently evil – as long as you’re smart about limiting your borrowing to the amount you can afford to pay back.

There’s a reason students are ENCOURAGED to plunge deep into debt for money they don’t need. The LENDER makes a profit on the loans, the more you borrow, the more they earn. It’s up to the student to take as small an amount as possible, to work part time during school, and to work summers and vacations in order to minimize debt. If you bury yourself in student debt, do not do it to get a job which is low paying, as you will be strapped for life.

I lived on campus all 4 years, and any loans went entirely to tuition, books, room, and board. Anything beyond that had to be paid from my own (term-time or summer) jobs. (And a set portion of that income was also reserved for tuition payments.) It (combined with a refusal to get a credit card till I graduated) made for a firewall that helped keep me from over-spending on “lifestyle” expenses.

Off-campus living can make it harder to define a clear firewall (housing and food expenses being more variable and not as easily tracked). But at the very least, you can ensure that your basic housing and food expenses are no *higher* than they would be if you were still on campus, take out loans on that budget, and use jobs to pay for any additional expenses as you go.

When I was in school over a decade ago, I had to max out my available student loans in order to qualify for aid. The financial aid office would not grant you need based stuff unless you borrowed money first, then they picked up the rest.

I worked an average of 30 hours/week during engineering school. You can definitely go to school and work at the same time, but you have 0 time for fun. I was jealous of the kids who didn’t have to work and could do all the clubs and go away for weekends. In the end, it was character building and something I’m proud that I accomplished. Life’s been easy in comparison..and I love having my weekends back.

What a great idea for a series, Trent! I can’t wait to read the rest of these.

I’m curious to see if “Financed a brand-new status car instead of paying cash for a practical used car” made the list. ;)

When I went to college (back when the market could go nowhere but up)I actually had friends that that took max student loans, invested most of it, and then paid them off when they graduated with the PhD and had a considerable amount of money left over…. Clearly this is risky as all get out, but it worked for them, to be honest I was kinda of down on myself for not being that ’smart’ at the time…

My sister and her friend did the lifestyle support loans in college. They went to spring break in France, Disney, etc all on loans. My sister lucked out and got a decent enough job right out of college; her friend was not so lucky. My sister paid everything off as soon as possible, living tight in a small apartment walking distance to her job. By the time she found her future husband a few years later, it was already paid off and her saving had begun. Meanwhile, her friend was not as lucky or smart. She got a decent enough job, but decided it wasn’t for her and found something else- completely unrelated to her field of interest from school and barely above minimum wage. However, she continued the lifestyle of the young and wealthy– partying a lot on weekends, seeing every new movie as it comes out, restaurants all the time, clothes and shopping as a hobby, etc. She is on her second bankruptcy– but the college loans continue to follow her and gain interest costs and minimum payments due….

Oh, and count me in on the people who believe one of the top ten financial mistakes should be “financing a brand new car bought from a dealer”.

I am guilty of that also, but not to that degree. I figure over 5 years I borrowed about $5-8K more than I really needed. I didn’t do anything extravagant with it, but it definitely improved my quality of life when I wasn’t in class or studying.

I figure between the extra borrowing and only working part time I probably have about $12k more debt than I should have, but I don’t regret it; I had a little “walking around” money at a time in my life when I could really enjoy it. Now that I’m in the professional world I don’t think the extra ~$100 a month I would have saved in loan payments would improve my quality of life very much. Money has been very tight for me since entering the workforce, but I bet I’ve learned to do more with what I have now than I would have if I had more financial breathing room.

I’m sorry I sounded so negative or stuck up. I don’t feel student loans are “inherently evil” but I think they’re at the opposite end of the spectrum of the way college counselors and others present them. I agree with comment #20 and some of the others that said they were presented far more money than they needed.

I feel a college education is presented as one of the only ways to get by in our society even if it means taking out student loans that could stifle someone’s choices for 20 years.

I feel student loans are “inherently evil” for 18 year olds with no concept of what “real” life is like when you’re done with school or possibly parents that have no experience to share regarding student loans (i.e. how $300 or $600 a month extra creates a huge hole in a budget once you’ve graduated). Also I don’t think they are fully informed about the future financial debt implications changing schools or majors can create in the future.

I really value Trent’s advice. It’s one of the ways people can become educated about the need to consider the pro’s and con’s of student loans instead of thinking of them as the only option.

Maybe these three examples can help you understand my thought process that has shaped my values.

My former co-worker has over $50,000 in student loans from changing schools and majors over the years. She has no hope of paying them off. Her preference would be to settle down and have kids but if she quits working she can’t afford the student loans, if she has a kid she can’t afford day care. I really see her as stuck in the middle and screwed by society because she thought college would be her only means of happiness.

My brother in law has over $50,000 in student loan debt. Now this is his fault. He did what Trent did. I feel bad for him but I balance that feeling with you’ve got to pay for your choices, even if they were made when you were young and dumb.

My DH got a GED, and a 6 month medical certificate and started working. After 10 years with the same company he keeps getting promoted. He had some scholarship money and minor student loans that covered only necessities. Now, he chooses to work part time. We wouldn’t have had the choice to put our priorities on things that matter if he had a bunch of “good” student loan debt piled up. That’s why I don’t like the term “good” debt. What’s good about it?!

I had a friend who went back to college (after several years out of school) and financed it with student loans. We were talking about lifestyle, etc, and she said that hers would go way down when she graduated. Why? Because she wouldn’t have the student loan money anymore. I couldn’t understand that statement. But now I do – she had the money so she spent it instead of saving it.

Interesting to read this now. I just took out my first student loan ever (for my second graduate degree — I’m getting my teaching license). I had to do loan counseling and take a quiz on it so I know what I’m getting myself into.

I’ve also been considering loan amounts. I only need to take out a small bit of loans, since I got a TAship to cover most of my tuition. Now, I’m debating living options. Honestly, while I could live with a bunch of people dirt cheap, I’m considering taking out a bit more in loans to be able to live with just one other person or by myself. You do have to consider how your living situation will affect your mental health & ability to do schoolwork. The key, as always, is to consider what is right and important for you and not blindly take out extra student loans when you could be living a bit more simply.

Not to judge your family Amanda, but even after all you did to prepare yourself for school and pay for it, your family still charged you money to live at home? Hm. I know I’m going to get a lot of flack for this, but I couldn’t imagine, as a parent who’s had practically a lifetime to accumulate wealth, to take money from my child who is just starting out and already doing so much for themselves all for the sake of a little extra food, a bed to sleep in, and some electricity. Of course I don’t know your folks or the circumstance, but that was my initial reaction.

I agree it’s a good question Imoot. However, if I had kids I’d do the same thing. It was a REALLY low amount of money, but it got me in the habit of setting money aside for necessities. I think I really taught me how to budget.

Think of how much money they saved me from having to get an apartment or live in a dorm too! I’d still be paying for it through student loans now. =) I think it worked out well for both of us.

I agree it’s a good question Imoot. However, if I had kids I’d do the same thing. It was a REALLY low amount of money, but it got me in the habit of setting money aside for necessities. I think it really taught me how to budget.

Think of how much money they saved me from having to get an apartment or live in a dorm too! I’d still be paying for it through student loans now. =) I think it worked out well for both of us.