Updated on 09.08.14

Ten Big Mistakes #1: Student Loans as Lifestyle Support

Trent Hamm

Avoiding the Trap of Student Loans

My first few years in college were supported by a collection of scholarships that covered my tuition, room, and board. However, it was up to me to come up with the means of supporting myself over my final two years in school. As is the case for a lot of college students, that meant student loans.

Up to the start of that first “loan year,” I was very conservative with my money in college (for the most part). I had lived in the dorms most of the time and also spent a year living in an apartment with several other people, which reduced the rent for each of us down to a pittance.

So, when it came time to take out student loans for that first year, I took the advice of my financial aid adviser and did the calculations to see how much money I would need to live for that coming year. The number I came up with was pleasantly small and so I felt confident that I would be able to survive on the tiny living stipend I expected from my loan.

What surprised me was that one could easily take out a much larger stipend than I could ever possibly need. The financial aid office allowed me to apply for a loan that gave me a living stipend somewhere around five times what I actually needed to live on, which escalated the total of my student loan for that year by more than $10,000.

I thought about all the stuff I had done without over my years in college. I’d lived in some awful places. I’d held back on buying a lot of things that I wanted. And here, I thought, the college was practically giving me a bunch of money to do with what I pleased. I could have that stuff – I didn’t need to live hand-to-mouth any more.

So I took it all. I took out the maximum possible loan both years, adding somewhere around $25,000 to my total student loan bill.

The consequences of that were painful. My repayment period was ten years and the interest rate on the debt was around 7%, so my extra money alone caused me to have an extra $300 month payment every single month for the next ten years.

When you’re freshly out of college with your first post-college job (meaning that it’s fairly low salary) and considering marriage, an extra $300 per month out of your monthly cash flow quite simply hurts.

Long Term Effects of Debt

That unnecessary $300 a month coming out of my take-home pay meant that I was trying to do all of the things I wanted to do with even less money to work with. I was left with a choice of living fairly lean or to make a financial mistake that would compound this one, take out more debt to continue an expensive lifestyle (and I’ll discuss this mistake later on).

Potential Solutions I Was Offered

I really was offered two great solutions to fix this problem – and I failed to take on either of them.

First, I could have kept my spending within what I was used to in college. I could have taken out a much smaller living stipend when I was there and gotten by doing all of my shopping at Goodwill and Fareway. This would have worked just fine, as it took care of all of my actual needs as a college student.

Later, I could have kept my post-graduation spending in check and paid down that student loan debt. Again, this would not have impacted taking care of my needs or even many of my wants – after all, I did have a good full-time job. I could have easily become more picky about my clothes and my food and bought many other things that clearly fall under “want” instead of “need.”

In both cases, I chose to spend that money with reckless abandon, which eventually brought me to the brink of financial ruin.

What Can You Do to Avoid This Trap?

If you’re a student, take out the minimum amount you’ll possibly need on your student loans. Don’t be afraid to shop for clothes at Goodwill or buy your groceries at the low-end grocery store. Get your entertainment fix by participating in on-campus events and community events. Focus on the relationships you build, not the specific things you do or the stuff you accumulate.

If you’re out of school, focus on debt freedom as a very early goal in your life. Cash flow is so important with regards to achieving your goals and having a big monthly debt payment just clogs up opportunities. Pay it down as quickly as you can, even if it means delaying some of your goals. Your ability to easily achieve those goals will be amped up incredibly high through freedom from debt.

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  1. Vicky says:

    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.

  2. Johanna says:

    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.

  3. 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! :)

  4. Niki J says:

    I was also in the same situation once I graduated. Luckily, I found your blog in early 2007 and it gave me tip to save money that I used to aggressivly pay down my student loans. I’ll be finished at the end of this year paying back $60,000. I’ve had to give up a lot to do that but the freedom I’ll be gaining is well worth it. Thank you for addressing this topic. I hope it can help many people avoid (or reduce) the prison of student loans.

  5. marta says:

    $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.

  6. Ruth says:

    @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.

  7. Theresa E. says:

    YEP! That’s me too. Took out everything I could to the max. Not quite out yet, but because of this going on before – couldn’t get a loan to cover the rest. Ick! Not looking forward to seeing what I owe as my monthly payment at the end :(

  8. Johanna says:

    @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.

  9. Jackie says:

    I did a similar thing in graduate school, and would have been better of not doing so. I was working at a company that would have paid for my graduate school in full. But instead of finishing up there, I quit and took out a loan.

  10. sewingirl says:

    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!

  11. marie says:

    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.

  12. Leah W. says:

    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.)

  13. Ben P says:

    I’m in a similar situation, although I can say that I’m in a much better position than many.

    I just finished law school. I was lucky enough to have a scholarship that covered tuition, but I needed to cover living expenses during school. My first year I attempted to use some savings to cover and lived pretty tight. The second and third years I borrowed the maximum they’d let me.

    I graduated with a good class rank and was lucky enough to get a decent paying job. (many of my classmates with similar debt loads didn’t)

    But dealing with the loan payments has still made me have to think carefully about a lot of future plans.

    My earnings are high enough that I don’t really worry about not being able to repay the loans, but not high enough that I have disposable income to significantly pay ahead on them or save any significant amounts of money on the side.

    I’m 26 and don’t quite have marriage or kids or buying a house on the horizon just yet, but if I were looking to buy a house I don’t know how I’d save up enough for a down payment. I know I need to think somewhat longer term, but being only a year out of school it’s still difficult for me to picture being 6 or 8 years down the road when I could conceivably have the loans paid off.

  14. Kellie says:

    A couple of years after college, my husband decided to go back to school for something different. I was working full time, low pay, but good benefits and making enough to pay the bills. When he applied for student loans, the financial aid dept tried very hard to convince him to borrow living expenses as well as tuition. The lady talked down to us like we were foolish when we said we ONLY wanted to borrow for tuition, not books, not living expenses. I’m very glad we stood our ground, as we were easily able to pay off the loans in a short period of time after he completed the program.

  15. alex says:

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

  16. Steve says:

    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.

  17. Adam says:

    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.

  18. Ella says:

    If I could go back in time and fix one financial mistake it would be to pay off my husband’s student loans right after graduation. If we had done that we would have kept living like students, rented, and never bought a house at 100% financing at the top of the market.
    Then when an opportunity came up to move to our home state, we wouldn’t have left a house under contract, wouldn’t have bought a second home only to then have the contract fall through on the first.
    Then, we would wouldn’t be trapped in two houses, we wouldn’t have a student loan payment and we could tell our sweet children yes to a few more of the fun things in life.
    Ahhh…what could have been. If you are just graduating – pay off your debt! It will be the best thing you will ever do and so, so much easier to do while your expenses and responsibilities are at their minimum.

  19. Wesley says:

    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.

  20. Scotty says:

    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.

  21. I believe that student debt will be one of the main inhibitors of the current generation’s financial and personal success later in life. The idea that an 18 year old is deemed responsible enough to take out thousands of dollars in student loans while that same 18 year old can’t have a drink is nuts. We’re failing to protect and/or completely inform these students.

  22. Courtney says:

    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.

  23. Katie says:

    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.

  24. Vincent says:

    I am completely in agreement with Katie @ #16.

    When I went to law school, I took out more loans than I needed to meet the bare essentials in order to have a decent (but by no means plush) lifestyle. I did this for three years, and wound up with a good size pile of federal student loan debt (about $100k, including tuition, etc).

    I did not starve, live in a crummy apartment with obnoxious roommates, or feel like I could never go out with friends. This led to a lower stress level and (most importantly) freed up my time for concentrating on my school work. I graduated high in my class, landed a good job, and am on track to pay the student loans off in short order.

    Scrimping and saving has its place, but I think it is also important to keep an eye on the long term. E.g., am I better off working at Taco Bell and getting Cs, or am I better off taking out some extra loans, doing better in school, and having better prospects? I am convinced that, in at least some circumstances, it is the latter.

  25. Amanda says:

    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
    *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?

  26. Adrian @ PIN says:

    I understand where you’re coming from. However, do you think that the issue of even using student loans to cover an education is conclusive? There are many ways to pay for your education (i.e. internship, working in the summer, etc.) that don’t involve you going broke.

    Just wanted to throw that out.

  27. Zachary says:

    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!

  28. Johanna says:

    @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.

  29. @Amanda:

    I have long suggested people avoid putting themselves in debt to go to school. I find that young people who do this are quite frequently deficient in some ways when compared to those who have built experience and wisdom by working to pay for school.

    The choices I made meant waiting for about 10-12 years to go into the profession of my dreams. I’m older than many of my peers, but I have experiences that many of them will never have. These experiences make me a better teacher and allow me to handle adversity in ways that many who have went from classroom to classroom (with student loans) would never conceive of. Plus, I graduated with zero school debt and have been able to work part time and not lower my standard of living.

  30. deRuiter says:

    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.

  31. Sonja says:

    My husband and I borrowed more than we really needed to and had loan payments for years after graduation. No one counseled us otherwise! We learned the hard way, but vowed not to let this happen to our kids and saved like crazy for their educations and talked to them regularly about our financial mistakes and their consequences. Last one graduated in 2009 with no debt and lots of gratitude.

  32. 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.

  33. Sandy L says:

    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.

  34. Kevin says:

    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. ;)

  35. matt says:

    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…

  36. Jean says:

    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….

  37. Nancy says:

    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.

  38. Cathy R says:

    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.

  39. Adam P says:

    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”.

  40. Steve says:

    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.

  41. lucy says:

    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!

  42. Amanda says:

    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?!

  43. Annie says:

    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…

  44. Susan says:

    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.

  45. Leah says:

    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.

  46. lmoot says:

    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.


    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.

  48. lsmith says:

    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…

  49. Jim says:

    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.

  50. Meriweh says:

    @#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!!!

  51. Amanda says:

    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.

  52. Amanda says:

    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.

  53. Kevin says:

    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.

  54. Robbie says:

    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.

  55. the Tropes says:

    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.

  56. Mary says:

    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.

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