Three Rules for Managing Student Loans Smartly
Whatever the expenditures are for, if you overspend, you’ll over-borrow. Unless you’re managing ALL your money wisely, you may indirectly be mismanaging your student loans, which will impact your lifestyle for years while you pay them off.
Borrow Only What You Need, Only When You Need It
Remember: the amount you borrowed is not the amount you’ll have to repay. By the time you finish paying off your student loans, you’ll probably end up paying around 30% more (in interest) than the amount you borrowed (depending on how many years you take to pay the loans off). If you don’t plan for this, your student loan payments may be much larger than you expected and take a bigger chunk out of your paycheck than you’re prepared to pay.
- When Calculating How Much Student Loan Money You’ll Need, Ask Yourself These QuestionsCan I reduce my expenses (the answer is almost always yes)?
Can I work more during the school year without jeopardizing my grades?
Can I work more during the summer or find a higher-paying job?
Keep track of what you owe in student loans and use an online calculator to estimate what your payments will be at today’s interest rates (while keeping in mind that rates could continue to go up).
- Use Your Student Loan Money to Finance Your Education, Not Your LifestyleMany college students honestly believe they are managing their student loans well. They keep the money separate from their other funds and use it only for tuition, books, and fees. In reality, many students who do exactly that are actually NOT using their student loans wisely. Why? Because when you’re in college, unless someone else is footing your entire bill, every dollar you spend unnecessarily will be a dollar you’ll have to borrow later, which means another dollar plus interest you’ll have to repay. If you could have used some of your own money for tuition and books, you wouldn’t have to borrow as much.