For most college students, education is the only thing worth worrying about—everything else can wait. That’s just plain nonsense.
More than 70 percent of students with a bachelor’s degree end up borrowing an average of $29,400. Student loan debt has passed the $1 trillion mark, and $66 billion of that is coming from grandparents trying to help their grandchildren. As Libby Nelson’s article points out in the above link, that $1 trillion plus mark doesn’t even count the lines of credit, loans, and living expenses that go into the college experience. As a result, some believe that more student debt means less consumer spending, which makes student debt is not just bad for students, but bad for the rest of us.
If you’re a student, this could make college sound like a Marvel supervillain, but it’s not education that’s the problem. Rather, the lack of financial education.
Interest Rates and Debt (ignore everything else if you must but NOT THIS SECTION)
Again, taking from Libby Nelson’s article, part of the reason for student debt is that more students are borrowing. Students will borrow from two types of loans: federal and private. While both are different in some ways, they’re similar in the most ominous way; you can’t be forgiven by filing bankruptcy. But let’s do some math to understand what’s happening to your finances when you’re a student.
Loans for undergraduates typically have an interest rate of 4.66 percent. If you’re in college, out of college, or wanting to go to college, you might be asking why that number’s so important. Let’s go back to the average amount a student borrows—$29,400. At an interest rate of 4.66 percent, that’s $306 over 10 years. Your total payment is no longer $29,400—it’s $36,836.
This explains why students go into default, which can ruin your credit for years. Why is that important? Because your credit score helps avoid 4.66 interest rates everywhere else. If you want to avoid a 4.66 interest rate on a house, car, or credit card, keeping your credit score high will ensure that you don’t pay an extra $7,000 just to borrow from a lender. Defaulting on a loan is like making a late house, car, or card bill late; it shows lenders you’re unstable, and can’t be trusted. This in turn, becomes a classic money vampire.
Set Aside that Emergency Fund (don’t confuse youthful for healthy)
There’s a reason why 6 in 10 Americans can’t afford a $500 emergency without going into debt. And that’s because we tend to have much of our money tied in debt, where our credit scores keep us bound to high interest rates that bleeds our wallets dry before we realize what hit us. Emergencies—even health-related ones—can affect students more often than assumed.
According to the National Alliance on Mental Illness, 1 in 4 college students have a diagnosable mental illness. Stress is the main factor, according to a 2012 survey of 90,000 students. And we now know how critical stress can be in reducing your lifespan and even shrinking the surface area of your brain. In addition—from the above Live Science link—a 2009 study revealed that 1,800 college kids died from alcohol related causes, and another 600,000 were injured from alcohol related causes.
Internships and Work Study (start your career while thinking about it)
The allure for college freshman is living inside a dorm room where no one tells you when to wake up, or where. Your parents are gone. Great news right? Wrong. It’s tough, but you’re in college for a career. Doing internships and work study allows you to gain valuable experience, and it shows potential employers you’ve already established a work ethic and earned experience. If you can, try to find a work study job that’s related to work you could see yourself enjoying. Maybe you’re not sure what you’re gonna do or be, but it’s more important to figure out what you like. The last thing you want to do as an adult is realize you don’t enjoy your job and make a career change.
Study Abroad (if you can; and yes you don’t have to afford it)
Your college education is all well and good (we hope). But like anything else, it’s probably not worth as much if you don’t explore. Going to other countries can be an eye opening experience. Not only might you find better career opportunities (or just better company), but it allows you experience education from a different cultural perspective as well. For example, your school might not have a strong journalism program, but then you go study abroad and the school has a journalism program offering you the opportunity to be matched with medial outlets, and provide real world experience.
Plus, there are programs—like Spret—that actually help pay for your travel funds for precisely the reason you’d hope; giving college students better opportunities.
Stay in School! (yes, it’s worth it in the end)
It’s important to know—for example—that for-profit colleges will be much more expensive than public or private non-profit schools in terms of borrowing. But that doesn’t mean spending less money on education is the better long term investment.
Like anything else in life, you reap what you sow. If you get the most out of your education through networking, or just plain working, studying, and real enrichment, there’s a good chance these traits will follow you into your career. The important part here is that staying in school allows you to know exactly what you’re being prepared for. You will be studying to decide what the rest of your life will look like; make the most of it!
For a FREE credit evaluation that can include a discussion about student loans with one of our senior credit advisors, call us at 210-520-0444 or visit us at our battle-tested offices at 6989 Alamo Downs Pkwy, San Antonio, TX 78238.