Taking out student loans tends to be a “given” for many students and a given you feel you don’t need to think about until after college. While that is partially true, do not make these mistakes:
- Using a student loan to go a college that expensive. A good way to think about it is this: the amount of money you are going to making in your desired profession is going to be quite similar. What is not always similar? The cost of college. Once you know the average salary you are going to be making once you graduate, you should calculate your average monthly loan payments. Choosing a less expensive college can mean the difference of paying off your loans years before a more expensive school. Hello nicer house, nicer car, nicer vacations!
- Using a student loan to pay for unnecessary things. Student loans should be used for tuition, room & board, fees, and books. Anything else you’re thinking about spending it on? Really reconsider. The late night pizza, trips to the mall, and alcohol has a heavy interest rate you are going to have to pay back. Also, once your loan money runs out, what are you going to do to earn your degree? Any money you have left over is a major bonus to paying your loans off, in a shorter amount of time.
- Not knowing how much money you are taking out, and if your career will be able to pay back those loans. Is any of this worth it? You have to research. Here is a great resource to help determine what your monthly loan payment will be, after graduation: http://www.isac.org/calculators/loan-repayment-calculator.html. Remember, when you calculate your monthly payment, you also should be looking at the low average salary you will be making (after all you will just be starting your career), and also calculate how much it will cost you to live (rent, bills, insurance, groceries, etc.). I know what you’re thinking, ‘my whole salary will be going to bills!’ Not if you take out and use only what you need, and please remember to see item #1.