Seven Reasons Why I Hate Student Loans
April 12, 2007 by Erik Folgate
Filed under Spending and Saving
If you’re thinking about taking out student loans for the upcoming 2007 – 2008 school year, read this before you do it. Every time I see my student loan statement, I cringe and say to myself, “Well, at least I took that really useful managerial economics class”. But seriously, if you need to take out the loans, make sure that you only take out enough to pay the tuition. Don’t take out the full amount to live on. You’ll thank yourself later if you take out enough to pay the tuition and then get a part-time job to pay for rent and food. So here are my seven reasons why student loans are the devil:
- Student loans will never go away unless you die. If you file for a Chapter 7 bankruptcy, they are one of the only unsecured debt that DOES NOT get wiped off your credit history.
- Government student loans seldom charge late fees, but then they will send you a letter a year later saying that you don’t qualify for the reduced interest rate because you didn’t pay every bill exactly on time….oops.
- The interest rate is now as high as a mortgage interest rate. When I consolidated my loans, I locked in 2.5% interest, but my wife’s graduate loans will be locked in at something like 6.5%. I love how the government decides to take money from the poor twenty-somethings when they can’t find enough money to justify their 400 billion dollar military budget.
- They are named after a bunch of grandmothers. Who is this Sallie Mae, anyway?
- All student loans should be subsidized. The government needs to get rid of unsubsidized loans that accumulate interest while you are in school. Students shouldn’t be penalized for being broke while in school and not have a means to pay the interest while in school.
- They take forever for many people to pay off. This DOESN’T have to be the case. You can eliminate student loan debt if you attack it aggressively. If you start paying $1,000 a month, you’ll see the loan go away in 2 years rather than 20.
- The government controls most of them. This always scares me, because the government never manages anything right. All student loans should be privatized and let the private companies compete over interest rates. This would allow the rate to consistently stay low rather than just jumping from 2 to 6 points in a matter of 2 years.
The bottom line is, avoid them as much as possible. They will feel like your roommate when you leave school and are living on your own. It is becoming so common for students to leave school with $50,000 plus in loans that it feels more like a mortgage! Except the only return on investment is the job you get, which sometimes isn’t enough to cover your rent and your second rent payment…I mean, your student loan. Again, my advice is to take out the minimum you need for tuition and pay the rest of your way through school by waiting tables or delivering pizza. You’ll cut your bill in half when you’re paying it back 5 years from now.
Nice post, particularly because I agree with everything you wrote… almost. With the low interest rate I have locked in, I’m not rushing to pay off the loan… even after taxes, my money I’m earning from interest in savings beats the interest I pay on the student loans. Although, It’s likely I’ll just pay the rest off in a lump sum to get the debt off my conscience.
I’m with Flexo; I can easily beat my interest rate and with a mortgage and new student loans starting up from my wife being in graduate school, I imagine that my student loans will be some of the last debt that we pay off. Once I have the cash and no mortgage debt though it’ll become a priority.
By the way, I just wanted to mention a few suggestions for your site. I found you through your paid review at FreeMoneyFinance. Your autodiscovery feeds on your site don’t point to your RSS feed; they point to one at bloggingpro.com instead. You will want to update that. Second, there is no way to contact you that I could find; you will want to either provide a way or make it more obvious. I figured that it would be better to leave a comment and let you know rather than just deciding not to bother letting you know.
I like the look of the site. Very slick.
After reading the post on your disdain for student loans, why do you have student loan ads on your website? [not to mention the revolting 'payday loan']
Well, I need someone to teach me how to filter out certain google ads or else I wouldn’t let payday loan ads on my site, EVER. As for the student loan ads, I am not saying that you should NEVER get a student loan. I was in school recently, so I know that the value of certain educations can out perform the student loans in the long term. I was just trying to make a point that if at all costs you can avoid them or avoid taking such a big loan, DO IT! You’ll definitely thank yourself in your twenties and thirties.
Blaine, thanks for the advice. I have an administrator that handles the site so I will let him know about the RSS thing. Also, we just tranisitioned to a new template so the contact page hasn’t been put up yet. sorry about that!
I like the site — got here through a review on Free Money Finance. The look is very nice and readable.
Good advice, too!