Money Talk Monday: Only take what you need

By Debra Avara

 

If I’ve already taken out student loans, what can I do now to help me get ahead of the debt once I graduate?

Very good question. The thing about student loans is that many students are taking them simply because they were told they qualify for them. They really didn’t need them to pay for school or living expenses, so they take them, have a few parties, take a trip, buy a newer car, etc. This is not what student loans were intended for, and frankly, I think it bites them in the …. when they have to start paying them back.

Others are taking the max in loans for all their living expenses and not working at all. Are ya kidding me?

If, however, you are the one who really did need the loan to get through, I would say, first, only take what you really need. Suze Orman said your loans should not total more than your first years’ salary. Oddly, I actually surveyed the students in one of my classes and only 1 student out of 18, knew how much he could be making when he graduates.

So, what can you do? Get prepared!

1. Find out what the entry level pay is for your job.
2. Pay attention to or find out how much you will have to pay monthly on your student loan.
3. Get a part time job to help keep the ‘need’ for student loans down.
4. Work full time during the summer and save, save, save.
5. Stay living with your parents while in school if possible.
6. Don’t buy a new car with payments that will make it impossible to pay both.
7. Make a budget! And stick to it.

Student loans are not dischargeable in bankruptcy. You must pay them back. So be prepared. And do not plan on ‘deferring’ them. ACK! The worst thing you can do is defer the payment. The interest continues to grow and grow. I heard a story of a woman who owed $35k. She didn’t make enough to pay it and all her bills (she wasn’t prepared), so she deferred for 15 years!! The total due now was $60k!

I also know a young man who is living with his parents, after a 4 year degree, because he can’t afford his loan, car payment, insurance and rent!

So take only what you really need, have a part time job and study, study, study!!