Student Loan Debt. Unless you’re an heiress to a famous hotel chain, if you’re pursuing higher education you can pretty much bet on accruing some debt by the time you graduate. That doesn’t mean you still want to be paying off your loans when you’re old enough to be sending your own kid to college, however. Surprisingly, even ivy league grads can make some dumb moves when it comes to paying for school and dealing with that debt later. Here are the top 5 college money mistakes that even the brightest among us make.
Student Loan Debt: 5 Dumb Mistakes
1. Paying for Prestige
There are some undergraduate degrees it might make sense to go into a lot of debt for. If you’re planning on going to law school, business school, or into another post-grad program where the brand of your degree really will factor into your admissions, then it might make sense. On the other hand, if your future plans aren’t so sure, or if you’re planning on entering a less lucrative profession, reconsider that mountain of debt. You might want to go to prestigious NYU over your local state school, but the $100,000 in debt you’ll rack up getting that history B.A. will continue to haunt you long after the wow-factor of the Big Apple has worn off.
2. Taking Extra Time Instead of Time Off
Can you really expect an 18 year old to go into a degree program knowing exactly what subject they want to study? For most teenagers, college is a period of trial-and-error. Following the inevitable changes of heart that can take place in the 2nd, 3rd, or even 4th year of college, students may decide to take an extra semester or year to earn their degree. There’s no shame in changing direction, but taking extra time might not be the answer.
Instead, consider taking time off from your degree, also known as “stopping out.” This time will give you the chance to figure out what you really want to do with school, not to mention give you a little time to earn some extra tuition money. Every semester you take over the traditional 4 years can mean a huge hike in the loans you have to take out; be sure it’s want you want before you take the leap.
3. Keeping Up With the Colleagues
Recent graduates of professional institutions, like business colleges or law schools, may find themselves as new junior partners in a firm. Suddenly, their discount suits and Honda Accord don’t look so hot next to their older, snazzier colleagues. While you’ve got to look the part, new professionals with grad school debt should avoid shelling out absurd amounts only for appearance’s sake. Use your extra income to pay down your loan balance, not to to lease a new Mercedes.
4. Accepting Adjustable Interest Rates
Adjustable interest rates just never make sense. How can you accurately plan your financial future, when you have no real guarantee of what your monthly payment will be, or how much you will end up owing over time? Private loan companies will try to make these monstrosities look appealing, and if you’ve exhausted every other source of funding, even smart people might buy into it. Consider taking time off to earn some money, instead, and continue looking for fixed-rate loans.
5. Not Changing a Payment From Month to Month
While it’s easy to have the same loan payment automatically debited straight from your checking account every month, you should reconsider it. Why? Nearly everyone’s ability to pay will change from month to month. While you should definitely have a minimum that you will always pay, don’t forget that any extra you put towards your debt now will pay off in the long run. If you’ve done well budgeting one month, put an extra hundred or two towards that principle. If it’s Christmas, and also your wife’s birthday, well, you might want to just pay your usual minimum amount.
Teaching is one of the most important jobs in society, and schools are always looking for qualified individuals. Have you always wanted to get a masters degree in teaching but struggled to find the time? A masters in special education can give you the tools you need to succeed, and the opportunity to make a huge difference in a lot of children’s lives.
This guide will help you in your student loan debt.