Comments on: Ten Big Mistakes #1: Student Loans as Lifestyle Support

By: Mary

Mary — Sun, 01 Aug 2010 22:14:37 +0000

I graduated a year and a half ago with $40k in student loans. I stupidly did the same thing, living generously and taking out the max loan amount “just in case” I needed it. The first two years I spent it carefully as I didn’t get enough financial aid and had to work both in school and during breaks to cover the rest of tuition, and my living expenses, but as each year went by I got more and more financial aid due to seniority, eventually the aid covered all my tuition and I had extra, and got more and more spendy with it, especially when my friends and I were turning 21. I lived in the fancy on-campus apartments, ate out a lot and drank my hearts desires. Now I’m graduated (in the bad economy no less) and since my grades suffered too (2.81, not bad but not good either), I don’t have a career in my field. I do remember, however, using my financial aid money for some good purchases, a very used car and a new computer being two of them.

Now I’m going back to school for a degree that will complement my existing one, taking on another $10k (probably) in student loans, this time I am carefully tracking every penny. I have enough to cover all my bills except for gas and groceries, which I split groceries with my live-in boyfriend of 2 years, and plan on only driving to campus 2-3 times a week, which is good because my car is ready to fall apart. I will carpool with my boyfriend and use the bus otherwise. I feel I got my head on straight this time around. I curbed my drinking significantly, I go out once every two weeks, it’s a definite learning lesson.

Bottom line: when you have loans for financial aid, budget it out. Live below or within your means. Keep the picture of you having a career in your field alive in your mind.

By: the Tropes

the Tropes — Tue, 27 Jul 2010 18:13:50 +0000

I currently owe about $31,000 on student loans. That number would be higher if not for a few things:
- scholarships, bursaries, grants, and student jobs
- loan forgiveness policy in my province
- working to get out of debt

Obviously I still have a ways to go. I don’t think I really wasted my loan money, though I could have lived more cheaply in some ways (worked more, had more roommates, ate less healthy food). I didn’t really splurge too much on big-ticket items, with one exception – a second-hand car that cost $2K.

By: Robbie

Robbie — Tue, 27 Jul 2010 12:40:18 +0000

I think this is far less of a problem than it was when I went to college 15 years ago. My husband is an undergraduate student and the available loans (even though costs are up and we have 2 children) are the same as then, which means we had enough after tuition and books to supplement one month of living expenses. And we do not live extravagantly or in an expensive area of the country.

By: Kevin

Kevin — Fri, 23 Jul 2010 15:43:09 +0000

I too made some poor decisions with the student loans I took out during my college years. Using the money for things that inflated my lifestyle and not for necessities. luckily I was able to land a good job after college and have been making steady payments. However my interest rate is so low now (1.65%) that there’s really not much of an intensive to pay it back anytime soon. I could easily make a better return on my money through other investments. This would be my explanation of “good debt”. I have a $100 payment a month for a long time but I’m not really paying much interest. I don’t really see a reason to start throwing large sums of money at this debt just to have it gone. I’d rather watch my investments grow.

By: Amanda

Amanda — Fri, 23 Jul 2010 01:51:21 +0000

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.

By: Amanda

Amanda — Fri, 23 Jul 2010 01:51:03 +0000

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.

By: Meriweh

Meriweh — Thu, 22 Jul 2010 15:20:05 +0000

@#22 – As a financial aid administrator, I can tell you that you were hoodwinked by your financial aid office requiring you to borrow before you can get need-based aid. The problem about student loan debt is that many students fail to plan and fail to read. I always tell friends and relatives to work backwards. Find people in the field you want to work. Find out where they went to school. Research which schools alumni are most likely to become employed. Lastly, budget, budget, budget!!!

By: Jim

Jim — Thu, 22 Jul 2010 14:09:00 +0000

As a financial aid administrator who awards educational loans, grants, and student employment daily, let me offer some insight. All schools are required by federal law to construct an estimated Cost of Attendance (COA) for each student. The COA includes direct costs (tuition, fees, things charged to all students) as well as ESTIMATES for everything else — books, room and board, personal, misc. expenses. These estimates are based upon annual surveys of our students’ reported indirect costs, and they are modest. That having been said, sure, students can find a way through creative lifestyles to live on less money than their fellow students’ average amounts. In fact, we encourage this, and in all of our loan counseling, online and printed disclosures, and reams of consumer information, we specifically give students the tools to do exactly that — identify what they really need for their living expenses, and limit their loans to that amount only. Unfortunately, our efforts are largely ignored…and many students regularly maximize their potential loan aid. In fact, our biggest challenge is in working with students who, already receiving maximum loan aid, still send us their receipts, rental agreements, etc., and ask for EVEN MORE loan money beyond what has been maximized on their behalf. The advice offered in this article is excellent and should be taken to heart…just don’t misunderstand, and assume that financial aid offices are forcing larger loans on the unsuspecting and vulnerable, nothing could be further from the truth. In many cases we are the only staff engaged in the higher education experience who are hard at work in limiting the financial commitments our students choose to engage in.

By: lsmith

lsmith — Thu, 22 Jul 2010 13:18:17 +0000

One note: A financial aid office is required to tell you what you are ELIGIBLE to receive. The one who makes the decision to borrow is you, the student.

From an aid officer…

By: FINANCIAL AID ADMINISTRATOR

FINANCIAL AID ADMINISTRATOR — Thu, 22 Jul 2010 13:11:22 +0000

From the begining of this article the writer is excusing himself for his financial responsibility which make him a coward in the sense that he is not responding as a mature individual to his decision. Loans are a financial resource to help you to achieve a college education, to succeed in college, not an instrument to set you up to financial failure. The way you handle your loan money will determine its consequences in your future, in your life. If you utilize loans for your benefits,then, you will reap pleaseant fruits. On the contrary, if you use loans to finance your insane decisions, then you will pay its painful consequences. So, do not cry like a baby now, and face the consequences in a way that you will learn from them.

By: lmoot

lmoot — Thu, 22 Jul 2010 11:41:47 +0000

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.

By: Leah

Leah — Thu, 22 Jul 2010 03:45:35 +0000

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.

By: Susan

Susan — Wed, 21 Jul 2010 18:51:09 +0000

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.

By: Annie

Annie — Wed, 21 Jul 2010 00:45:55 +0000

I recently had a friend encourage me to go back to school–not for the education but so that I could buy a Macbook I was thinking about saving up for… I was astounded and appalled…

By: Amanda

Amanda — Tue, 20 Jul 2010 23:14:29 +0000

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?!

By: lucy

lucy — Tue, 20 Jul 2010 22:33:00 +0000

I’m in the group that borrowed more money than I needed for college. Luckily, I got a decent paying job and I’ve got a good plan for paying all those loans off. But I wish I had realized earlier how much I could be saving towards replacing my clunker car instead of paying towards student loans…

I’m also looking forward to the rest of this series! It should be very enlightening!

By: Steve

Steve — Tue, 20 Jul 2010 14:55:58 +0000

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.

By: Adam P

Adam P — Tue, 20 Jul 2010 13:59:13 +0000

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”.

By: Cathy R

Cathy R — Tue, 20 Jul 2010 13:52:03 +0000

Students should be encouraged to apply for (and use) the Work Study program. This is not a loan, but a grant and they don’t have to pay it back.

I work at a university and I am shocked at the number of students who go for loans and don’t take advantage of the WS program… I believe that it is Federally sponsored and should be widely available.

By: Nancy

Nancy — Tue, 20 Jul 2010 13:46:32 +0000

I’m a high school teacher and advise lots of seniors about the pitfalls of excessive student loans. One girl showed me her financial award letter that gave her $20,000 of student loans per year for a predicted total of $80,000! I pled with her to go to community college. She became angry and said she was “better than that!”. She had a marginal ACT and is majoring in communications.

My own children work 50-60 hours per week as lifeguards/WSI instuctors during the summer. They work at hospitals during the college school year as CNA’s/Phlebotomists, as those jobs pay more than work study. The key is developing a skill set BEFORE you go to college.