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- Paying for College
The Downsides of Student Loan Debt
As my kids get older I am starting to think more and more about college. I was fortunate to escape college with no debt, but I spent a few years paying off my husband's student loans. I didn't like it. It caused a lot of budget problems in the early years of our marriage. I have known all along that I didn't want my kids to take out student loans. The more I read about student loans the more horrible I think they are. This hub is to warn you about the drawbacks of student loans.
College is expensive and very few people can afford to pay cash for it completely. At least not the way most people go to college. So they turn to student loans. Student loans come in two types: subsidized and unsubsidized. Subsidized student loans do not accrue interest while the person is in school and are the lesser of two evils. Unsubsidized loans will accrue interest the entire time a person is in school - even though they have no means of repaying during that time. A person can get federal student loans or go through private companies to borrow money for school. Either way - you don't want to do it.
Typically when you finish school, you are required to start repaying your loans six months after you graduate or stop taking classes. Think back to this time in your life. Did you have a lot of extra money? I know that I was broke - and I didn't have any debt. Typically a person just starting a job after college is not going to make a lot of money. If you want your child to NOT move back in with you after college then you need to avoid student loans at all costs.
Entry level jobs for people with little experience (as is the case with most new college graduates) do not pay a lot of money. Even working full time, many students are not able to pay back their student loans. According to the book Debt-Free U, by Zac Bissonnette, many people that have a lot of student loan debt end up filing for bankruptcy, yet student loans cannot be discharged with a bankruptcy.
Student loans are money loaned to a student or their parents with no collateral. You are banking on your future earnings to pay back these loans, with nothing tangible to cover them if you can't make the payments. Think about a car loan or a mortgage. If you can't make the payment you can at least sell the car or house to get out from under the debt. This isn't an option with student loans. What if something happens to you and you are unable to work? You might get sick or hurt. The only way to get a student loan forgiven is to either die or become permanently disabled. Neither of those options sounds very appealing to me. You, and only you, will have to pay back every penny of this debt. Typically student loans are not for small amounts either. We are talking about a lot of money!
Young adults graduating college saddled with student loan debt will have a tough time getting ahead financially. It will affect the rest of their lives. They will be limited in where they live and what job they take due to the need to make a certain amount of money. Unfortunately many people graduate college and can't even go into the field they majored in because they won't make enough money to pay back their student loans.
It is hard to think about retirement when you are just starting out in the world, but the more time your money is invested, the more it will grow. If you are using all of your disposable income trying to pay back debt you will have nothing to invest for retirement. Student loans can take anywhere from 10-30 years to be paid back. Just think if you could be paying yourself that $500 or $1000 each and every month for that many years how much money you would have saved for retirement.
Think of how limited a person is when they have a large payment - sometimes as large as a car payment or mortgage - each month. Want to take a vacation? Can't afford it. Want to start a family? Can't afford it. Want to stay home with the kids? Definitely can't afford that! Need a new car? Can't afford it. The list goes on and on. Owing huge sums of money causes untold amounts of stress in a person's life. It is not worth it!
There are so many options to get a college education debt free. It will take work and perseverance, but it can be done! It might even take longer than the traditional four years, but it will be worth it in the long run.