Getting a student loan can hurt you much worse than just a monthly payment.
Nowadays, many people think you can't be a student without a student loan. It's easy to get a federal student loan or even go to the local bank to pay for your education, but doing so hurts both you and the economy in the long run.
The Rise in Lifestyle
Unfortunately, people are borrowing more than ever before. In 2001, $4 billion in student loans were taken out. Recently, that number jumped to $17 billion. Some people may say it's because of higher tuition costs, and yes, that is part of the reason. But more than likely, a lot of it is lifestyle choices. When some people to go college, they want to live in the off-campus apartment and eat at restaurants instead of living in the dorms and eating dorm food.
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At this point in your life, it's time to face some facts. You don't make any money, so you don't need to spend any money. When you get out of college, you won't still be feeling a meal in your belly from your junior year. But if it's one of the many things you bought with your student loan, then you'll be paying for it for years to come. That's stupid! Which would you rather be – a debt-free graduate or a new graduate with tens of thousands of dollars in debt?
Borrowing Hurts Us All
The numbers are convincing. Let's say you borrow $47,000 for a student loan. At a 5% interest rate, the payments are about $500 over 10 years. After 10 years, you've spent almost $60,000. If instead, you invest that money in a good growth-stock mutual fund averaging 12%, after 10 years you will have saved $115,000! Which do you think is better?
Borrowing so much hurts the economy in multiple ways. More debt means less money invested. If money isn't invested, the economy doesn't grow as well. More debt also means less money to outright buy things, which leads to more financing to buy things.
The sad part is that after you've gotten a student loan and paid on it for a couple of years, that's when the reality hits you. That's when you realize that you have obligated yourself to pay thousands of dollars in interest over several years, instead of keeping that money for yourself and investing it, or giving it away, or even saving up and buying things with cash.
Well, this is your wake-up call! Don't take out a student loan. You can apply for scholarships and grants, work part-time or go to a cheaper school. But it's not worth it to take out a loan and start behind the financial 8-ball in life when you graduate.
If you are paying on a student loan, get on a budget today and start paying it off. The sooner you pay it off, the more money you'll save in interest. Make it happen!
Let's all kick student loans to the curb! If you're in college or know someone who is, check out Dave Ramsey’s Foundations in Personal Finance College Edition curriculum.