Paying off student loans is always a nightmare. If one is unfortunate enough to graduate during a recession, as I did (albeit decades ago), the problem is compounded. You’re trying to simultaneously land a job and keep your creditors at bay. And if you’re living with your parents, they might be getting tired of you eating their food and commandeering the T.V. remote.
I signed up for my student loan about three decades ago. I withdrew about $4,500 and including interest paid, the total came to about $6,000. Although this might not seem like a lot of money in this day and age, three decades ago it seemed like a fortune. It could have been substantially more, but I lived at home for the first two years of college, had a hefty scholarship, and received some financial aid.
Okay, this is how I paid off my student loan. Right after I graduated from college, I got into some serious trouble. During a period of time when I had no medical insurance, I became ill and ended up in the hospital, incurring a raft of medical bills in the process. I was thus compelled to move to a different city with a much lower cost of living, which turned out to be my salvation. Because it cost less for me to cover my living expenses, it was easier for me to pay off my student loans. Another benefit of moving was that the competition for work was less fierce. I had greater professional opportunities than I had in one of the world’s more desirable locations, and greater training opportunities as well.
So, do I think borrowing the money was worth it? Well, yes, but probably not in the way one would think. It did provide me with the coveted college degree that most employers demand these days. I believe that higher education has become big-business and there needs to be some exploration of that. For instance, there have been instances lately of colleges and universities steering students towards particular high-interest lenders. Overall, I think my measly student loan helped me greatly in terms of understanding debt, and money in general. Here are a number of things I learned from the process:
Number One: Lenders will lend you much, much more money than you could ever hope to repay. Please remember this, not only when you take out student loans, but also when you buy a car or a house. Lenders don’t care about your financial situation, your health or your sanity. They’re just trying to wring every last dollar out of you that they possibly can.
Number Two: Before you select a college, make sure you’ll be getting a good return on your investment. If possible, try and audit a few classes before you apply. Every learning institution has a different style and attracts different types of instructors. See if you can live with both before you sign up. It might cost a little money to audit classes, but in the long run it’ll pay off. Also do some job research beforehand to see if your long-term goals are feasible, and some number-crunching in terms of what it will take for you to pay off your student loans. Could you attend a community college for a few years and live with a parent(s)? It could really help to reduce the amount of your loans. And don’t assume that an Ivy League or other private college will always be worth the money. It might not be. The ultimate worth of your degree will depend more on how much effort you expend in learning and absorbing your education.
Number Three: If you already have enormous student loans – you’ve signed the papers, gone to school, and there it is – see if you can refinance it. This is assuming, of course, that you have a job. If not, this may have to wait until you do.
Number Four: If you have enormous student loans and don’t have a job, contact the lending institution and explain the situation. They won’t be happy about it, but they’ll be a lot more upset if you skip town and don’t contact them at all, which is what I did when I was twenty-two. (That’s not a very good strategy, particularly if your loan is federally guaranteed, which mine happened to be.) Keep them in the loop regarding your financial situation.
Number Five: After you graduate, consider relocating. If you live in a highly-coveted destination, you can expect to pay a lot more for housing, food and utilities. Sometimes moving to a slightly less desirable location can make all the difference in terms of paying off your student loans. I’m not recommending you move to a one-horse town, but somewhere your education will provide you with a competitive advantage.
Number Six: Payoff of student loans always equals pain. I borrowed very little money and it still hurt to pay it off. If there’s any way at all around taking out a student loan, look into it. There are all kinds of scholarships out there, and the Internet is an easy way to track them down.
These days, signing student loan papers is scarier than ever. But strategic planning will give you a solid edge in the process. You just have to remember that student loans are a real financial obligation, regardless of how old you are when you sign up for them or how awful your job prospects may be when you get out. And you have every right to demand that your education provide you with useful information and skills. Keep your wits about you, and don’t borrow too much money. And then your degree will be a solid investment for you.