I was offered $17620 in unsubsidized Stafford student loans. I did not have to accept the loans because 1) my tuition will only be $9000 this school year 2)I’m working, so I don’t need loans for living expenses. However, if I did not have scholarships or help from Mr. Paycheck, I would be forced to take a part of these student loans.
Then, I started thinking of what $17620 would get me:
- Down payment on a $100K house or condo. Hmm…not sure I can get that type of house in nice Dallas. More like $200K-$250K.
- A nice brand new car! :) Mini cooper anyone? LOL
- A nice vacation to Europe and Latin America. Yup, both!
- Lots of shoes and clothes….my closet wouldn’t be big enough!!!!
- An Iphone? A new watch? Or maybe an IPAD???
And that’s how people quickly spend loans. We get caught up in the money that’s in our checking account once it’s disbursed, that we forget the bank owns our lives until then, and we will be paying for them to take their clients to expensive dinners and golf outings.
If you are planning to borrow money for education, car, or a house; make sure you pay the minimum amount of interest to the bank. A lot of people get excited over the 200K house they bought with 4 bedrooms, 2 baths, 2 living room areas; they forget that house will probably end up costing 400K after interest payments. Or that nice brand new car that was only $17000, will end up being $22000 after interest payments. Who kept the extra money? The bank.
I’m not saying banks are evil. I believe they are needed financial institutions. But they gotta make money. Just make sure it’s not off you! Cause you’re not getting any filet mignon!
You are probably thinking, oh I would never do that with my student loans, but you would be surprised at what you spend the money once you get it. I had classmates who I knew were broke because we talked about, and as soon as they got their student loans would buy a fancy new smartphone or go on vacation.
If you are a student, my advice is to calculate how much you need to scrape by. And take out just that amount. Find a job, or eat ramen noodles, but don’t take out the max. amount of loans. If you can start paying them off just a little before you graduate, start paying them off. Don’t wait until the grace period is over to start making payments, by then you will be too used to having money in your pocket and you will only want to pay the minimum.
Just trying to change some mindsets over debt :) I know a lot of people don’t mind debt, but I’m just not one of those people.