The Future Burden of Student Loans

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I Didn’t Have to Have Student Loans

My mother was a loan officer at our small, hometown bank. She repossessed cars almost daily from folks who would rather pay their cable bill and buy cigarettes than pay their loans. Aside from the irritation of watching people make poor financial decisions, the job changed her perspective on debt – she didn’t want anything to do with it. However, she also wasn’t able to squirrel away any money in a college fund for either my sister or I.

After I decided against a free ride at the US Air Force Academy, mom tried to nudge me toward the largest state university because they had also offered me a free ride, based on my ACT scores. As much as my mother tried to encourage me to attend the free-for-me state school, I fought her. I didn’t want to go there. They only had a mechanical engineering program and I was interested in aerospace engineering. Side note: turns out a mechanical engineering degree would have qualified me for each and every one of my professional jobs. I had my heart set on a private school, states away, that had graduated a significant number of astronauts. Of course, it came with a hefty price tag.

I’m nothing, if not stubborn, and so my mom finally gave in. I would receive VA benefits because of my deceased father’s service and the school had offered me a scholarship that covered half the tuition. I can remember my mother telling me, in a very serious tone, “you’ll have to take out loans, but I suppose I don’t worry about that with you. With your degree field, you will make enough to pay your loans.” We never discussed any ways of avoiding loans altogether.

Student loans

Avoiding Student Loans

For those of you nearing college (or with college-aged kids), let’s quickly consider a few ways to avoid loans altogether. These ideas are covered in detail in a number of good articles (like this one), so I’ll be brief

  • Research scholarships and grants as much as possible
  • Attend a school close to home, so that you can live with mom and dad for at least a couple of semesters
  • Work during the school semester and during summer beaks, earning enough to cover tuition
  • If you ever can’t cover tuition, take time off from school until you can

The problem is, for each of the respective points above, these are the excuses you’ll likely hear from the college student

  • Researching scholarships and grants takes too much time. This is my senior year in high school and I want to enjoy it. YOLO.
  • No way am I living at home. I want the full college experience of living on campus. I want to strike out on my own and be independent.
  • I can’t work during college and keep my grades up and have the college experience.
  • If I take time off, all my friends will graduate before me.

Armed with their excuses (and make no mistake, these are excuses, not reasons. There’s a difference), these kids will graduate from college with a student loan burden that now keeps them, ironically, from living the YOLO lifestyle, from living in their own, or from having their dream job. So, before making too many excuses, maybe it’s best to consider the future burden of student loans.

The Future Burden of Student Loans

It’s not too complicated to figure out the future burden of student loans. Simply determine how much money you think you will need to borrow per semester. Then use a site like this tool to determine what your payment will look like. You can play with the payment terms to see how your monthly payment looks for a ten year repayment plan versus a twenty year repayment plan.

Then think about what that monthly figure means. Let’s say you figure you’ll have a $300 monthly student loan payment. You know what I can do with $300? I can have a new car. I can buy a lot of new clothes and shoes and gadgets. I can save up for a house down payment or avoid having to have roommates (especially of the mom and dad variety). Want to go to Vegas for a week? Sure! I have $3600 to blow!

My mom was right – I can pay my loans. My payments are around $300 a month, like the example above. With an engineer’s salary, $300 is fairly doable. Now, my husband’s payments are closer to $1,000 a month. What would you do with an extra $1,000 a month?

The future burden of student loans isn’t just the monthly payment – it’s about what it keeps you from affording. And remember you’ll be paying on those loans for up to 20 years, possibly keeping you from taking full advantage of compounding interest in retirement accounts. Those student loans could essentially impact the rest of your life.

The thing is, college is (supposed to be) four years. Be financially responsible for those four years, and your future self with thank you for the next 60 years.