College and University Blog
Borrow and Spend Student Loan Money Wisely
Hundreds of angry college students held demonstrations on April 25, 2012, the day that student loan debt was expected to surpass the $1 trillion mark. Sporting placards around their necks displaying the amount of money they will owe upon graduation—in most cases, the figures were tens of thousands of dollars—protestors waved signs demanding “Debt Free Degrees” and even set fire to documents reading “Education in America: don’t Bank on it.”
Average Student Loan Debt Over $20,000
In March 2012 the Federal Reserve Bank of New York reported that the average outstanding loan balance per borrower is $23,300. Ten percent of borrowers owe more than $54,000 and three percent owe over $100,000, which means it’s not unusual for student loan payments to exceed $1000 per month.
A college degree still has the potential to help boost your earning power, but it’s no longer a guaranteed golden ticket to success. More and more new grads are almost forced to accept jobs that pay less-than-ideal salaries and leave little money for bills, let alone incidentals. It’s just about impossible to pay for food, shelter and make student loan payments of that nature while earning $9 per hour.
Are Students Borrowing Too Much Money?
Some people have a sympathetic view of the young adults saddled with this crippling financial burden, but others take a difference stance. After all, a lot of students are opting to attend pricy schools out of their family’s budgets and pay little regard to the amount of money they are borrowing.
In May 2012 The New York Times mentioned a 23-year-old college grad who attended a private college with faculty and staff that “urge students to pursue their dreams rather than obsess on the sticker price.” Many other colleges also fail to warn students about the debt they may encompass, instead pointing out that the majority of students receive financial aid (which of course includes loans.)
“I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt because there’s no reason for that,” Representative Virginia Foxx (R – NC) said in a radio interview. Foxx is chairwoman of the house Subcommittee on Higher Education and Workforce Training. “We live in an opportunity society and people are forgetting that. I remind folks all the time that the Declaration of Independence says ‘life, liberty, and the pursuit of happiness.’ You don’t sit on your butt and have it dumped in your lap.”
Critics, such as Rep. Joe Courtney (D-Conn.), disagreed with Foxx, saying “It is a sad statement when today’s Republican party turns its back on a program that helps millions of Americans fulfill their dreams.”
Avoid Common Student Loan Mistakes
Even so, most people would agree that college students should take more responsibility for their finances. After all, an important aspect of going to college is learning how to be a responsible independent adult. Before student loans were as widespread as they are today, college students lived more frugally. Consider these suggestions for managing your money wisely:
- Attend a college that is realistically within your budget. Yes, even if you think you’ll land a fantastic high-paying job after graduation! Also realize that if your parents have low or modest incomes, they probably aren’t going to help you out financially. They might not help you out if they’re rich, either. In other words, don’t bite off more than you can chew.
- Only borrow what you need. Many students are eligible for more student loan money per semester than they really need. Resist the urge to accept more just because you can. You will have to pay it back with interest, a fact that many college students tend to blow off. This student loan repayment calculator is an easy way to estimate your monthly payments. They may be much higher than you have been estimating in the back of your mind.
- Use your student loan money to pay for college, not a lifestyle you can’t afford. One USA Today contributor confesses that she blew student loan money on cosmetics, Starbucks and a costly new place to live during her junior year without paying much attention to her finances. She is not alone. US News and World Report mentions a student who used student loan money to make a down payment on a car. A 2004 study reported that college students spend more money online than any other demographic group and nearly 40% of their spending is on discretionary items. That said, think twice before making any purchase.
Related Posts:
How to Enjoy College without Going Broke: 9 Easy Ways to Save Money in College
Melissa Rhone+
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.