College tuition has nearly doubled since 2001 thanks to federal student aid. According to a recent report from the Federal Reserve Bank of New York, the more government subsidizes higher education, the more expensive tuition is, which forces students to rely on loans more often.
I graduated from college two months ago and have a pile of debt to start repaying. I don’t regret taking out loans to fund my education, but I do regret some of the mistakes I made along the way.
Here are 3 things I wish I knew about student loans before college, with some GIFs to keep things upbeat:
1. Do Your Homework First
This may seem obvious, but shop around and compare interest rates before arbitrarily agreeing to a loan package.
One day during the summer between my freshman and sophomore year, the tuition bill was due. My parents and I realized there was no way we could pay it, so we rushed into a loan program that the school provided in order to cover that semester. One semester turned into six, and I never once looked into refinancing or sought a better interest rate. I was embarrassed and scared about my financial future, so I just accepted the rate I had and didn’t try to find something better.
If I had done my homework, I would’ve learned that the interest rate for a federal loan at 4.3 percent would have been much lower than the 7.8 percent rate that I’m stuck at now. At the time I assumed a private loan must be a better deal because it didn’t have the government involved. Private means more competitive and less expensive, right? Not with student loans, because the government has taxpayers subsidizing them.
2. Pay Off Your Debt Whenever You Can
I didn’t look at any of the balance statements that appeared in my mailbox every few months. I closed my eyes and wished away the interest that accumulated while I was in school. My strategy was to ignore it and hope it would go away. I’ve since learned financial commitments follow you to the grave; they don’t just go away if you ignore them.
I was so scared of my looming financial commitments that I didn’t attempt to make a single payment while I was in school. I behaved like a prepper on the eve of Y2K and hoarded cash. Any extra money I had all went into my savings account or into little hiding places in my dorm room. I figured I would need it all for my inevitable, post-graduation doom. The dumb part about that plan is that I lost money. The purchasing power of my savings dwindled due to inflation, while the interest rate on my loans rose.
If I could go back in time, I would tell myself to put some money on my loans each month, instead of hoarding it all in my savings account.
3. Don’t Be Embarrassed
Honestly, how many 19-year-olds can cough up $40,000 a year to fund their dreams? The answer is very few. I had scholarships and a lot of help from my parents, but it still wasn’t enough to cover the tuition bill.
If I hadn’t been so embarrassed about my pile of growing debt, I would have felt more confident about repaying my debt while in school. The thought of making piddly payments with the small sums I earned working in the campus cafeteria, or as a freelance writer, was too mortifying to bear. By the time I earned more money as a part-time reporter my senior year, I felt overwhelmed by the amount I had amassed and didn’t change my ways.
Student loans are like car accidents: they’re embarrassing, and no one thinks they will get in one.
Statistically, however, they happen to nearly everyone. Insurance experts estimate the average driver will wreck his or her car every 17.9 years. Likewise, most college graduates also have student loan debt to pay off. In 2012, nearly 70 percent of bachelors degree graduates took out student loans to finance their educations, and those graduates each have over $28,000 in debt.
I’m beating the statistical odds with loans and car accidents. Not only is my debt well above the national average, I’ve already totaled a pickup truck, and wrecked three other cars. (Full disclosure: I’m an awful driver. I’ve hit parked cars, mailboxes, streetlights, you name it. One time I even took out a stoplight on a freeway on-ramp.) The point is, statistically everyone wrecks their car, and most students have to take out loans in order to graduate. So don’t be afraid of car accidents or loans. If you’re going to drive or attend college, own it. Wear a seatbelt and pay attention to your debt.
To sum up what I’ve learned: don’t be embarrassed or afraid. Take control of the situation. Shop around for better interest rates, make payments as you can, and don’t let the interest creep up on you.