If someone offered me a time machine to go back and fix my student loan mistakes I would. I now have six figures of debt because of those mistakes. I took out $57,000 for my undergraduate degree and $40,000 for my master’s which I graduated with at the end of 2014.
You probably noticed that those don’t equal six figures of debt. That is because my accumulating interest pushed me well over the edge.
I have around $30,000 JUST in INTEREST! $30,000!
That’s how much the average student graduates with! It’s sickening.
While, the interest rate was a problem, it was also my lack of understanding and other mistakes that helped lead to six figures of student loan debt.
If you are in college or are preparing to go, use my mistakes as a lesson to graduate in a better financial place than I have.
Mistakes I Made Before I Took Out My Student Loans
I Didn’t Apply for Scholarships
Honestly, I believe this was due to lack of self-confidence. I was an average high school student. I believe I graduated with a 3.2 GPA and participated in a few extracurricular activities.
People I knew were applying for scholarships, but I didn’t think I would ever win one, so I never tried. Who knows how much help I could have missed out on.
If you are a decent student, I highly encourage you to apply for several scholarships so that you have a chance to have some money for college and need fewer student loans.
You have nothing to lose but a little time filling out applications. Even if you don’t win a scholarship, you will never have to wonder if you made a mistake by not applying in the first place.
Not Checking Interest Rates or Understanding How It Works
I really really wish I had understood interest and had investigated interest rates. While federal loans you can’t do much about, you can for private loans.
I only had one loan through Sallie Mae because, at the time, if you lived off campus you couldn’t have federal loans. They changed that the following year. Anyways, I should have applied for loans with various providers to get a better interest rate.
I believe my interest rate started at 7% but right before I refinanced in 2016 it had climbed to 11% because it was a variable rate. At least federal loans are generally fixed interest, so they won’t increase over time.
I also should have understood that interest starts the moment you take the loans out. For some reason I only thought about interest after graduation. It kept accruing when I dropped to part time for a short period and in times of forbearance and deferment.
Interest never stops accruing until the debt is paid. If you haven’t taken out loans yet, please shop around if you need private loans and keep an eye on that interest!
Lack of Research into Schools and Majors
This was probably one of my biggest mistakes that I hope you can avoid with your college journey.
I didn’t properly research schools and just picked one that was close by. It wasn’t a good fit (too big) so I transferred to the next closest school. It was also not a good fit (too strict a curriculum) and I switched to the school I graduated from.
The same can be said about my major because it shifted a bit from animal science to wildlife biology and then finally to making my own major which consisted of wildlife and other science classes, and hands-on internships.
Because of these two things, I lost credits switching schools and majors which meant I lost MONEY. I pretty much threw away money. A lot of money.
If you are getting ready for college, do your research on which schools can give you merit scholarships, which schools you would fit well in and figure out what major you will be happy with. This will save you so much money as well as time.
If you are currently in college and thinking about switching majors or schools, think about it very carefully and don’t make the change lightly. Put some effort into your research and figure out how much you would lose before you make the switch. Only do so if it’s something you know you will stick with once you make the change.
Mistakes I Made During College
Not Using My Job to Make In-School Payments
One of the surprising things about how much student loan debt I got myself into is that I did have a job all the way through my undergraduate degree.
I didn’t have one during graduate school only because it was a one-year full-time program and they told us not to.
Since I had a job, I could have been making payments to my student loans while I was in school even if it was just to cover the cost of interest. If you are still in college or getting ready to start college, plan to make at least some amount of payment to your student loans.
I can’t stress this enough.
You will be in such a better place financially when you graduate if you have been making any kind of payments. Try to live frugally as you can with your student loans if you don’t have a job (of course also if you do) so you can put whatever you didn’t need towards the repayment.
Never Creating a Budget
It wasn’t until December 2015/January 2016 that I finally figured out that I needed to budget. Until then I just kind of watched my bank account and made sure I didn’t dip too low in funds.
That was a big mistake because I have no idea what I was spending all my money on.
Once I started budgeting, all my money started making more sense. I now put 50% of my take home pay towards my debt and other financial goals.
I can only imagine what my financial situation would have looked like if I had started a budget in college and monitored my finances like an adult. Start a budget now, even if you are reading this as a junior or senior in high school and don’t have a job yet.
Budget whatever allowance you make or birthday money you get. Track what you bring in and what you spend.
The sooner you start, the sooner you will begin making better financial decisions (though it is never too late to learn).
Wherever you are in your college journey, choose a budgeting program and start budgeting today.
No Plan for Faster Payoff
When I took out my loans I knew I had a 10-year repayment on them. It never dawned on me that I could (and should) pay them off faster. I just thought everyone paid them off over the standard period.
I wish I had known that it is better to pay them off faster and not have to pay thousands or tens of thousands of dollars in interest. I should have had a plan to pay them off faster from the beginning.
This is now what I encourage everyone to do and I have even created a debt payoff challenge to encourage people to make an actionable plan to get out of debt faster.
Make extra payments, refinance, or do what you need to do to pay your student loans off faster and escape the accruing interest.
Mistakes I Made After Graduating
Not Understanding Capitalization
Did you know that when your student loans enter repayment your interest capitalizes? I sure didn’t!
That information hit me like a ton of bricks. I was now paying interest ON my interest. How crazy is that?
Your interest will also capitalize when you switch repayment plans or finish a forbearance or deferment period.
If you find yourself needing to postpone payments after graduation, try to at least pay the interest during this period so you don’t have to pay interest on your interest.
I Didn’t Use the Grace Period Wisely
Another big mistake was not using the “grace period” wisely. This kind of goes along with not making payments while in school.
Once you graduate you have a 6-month period in which you don’t need to make payments. This allows people time to get a job after college.
This is all well and good, but 1) you could be using this time to make progress on your student loan debt and 2) your interest is going to capitalize at the end of the 6 months, so you are just adding 6 more months’ worth of interest to your capitalization.
Instead, you should be making payments to all your student loans OR you can get strategic and start putting money towards the lowest amount (snowballing your debt payments) or to your highest interest like private loans (also known as the avalanche debt method).
Avoiding These Mistakes
I hope you have taken what I have to say to heart.
Use this to avoid the same mistakes that I have so that you can graduate from college in a better financial place and not in six figures of student loan debt.
Student loans are seemly easy to get but are so hard to get rid of. I wish you the best of luck with your college career and your financial journey!
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by Rebecca Forst a 2014 graduate with a Masters in Conservation and Biodiversity. She blogs at Surviving Student Loans in hopes of sharing her story of paying down her debt and inspiring others to pay their debt off faster as well. She has created a free 5-day Roadmap to Debt Payoff challenge to help people kick start their journey to financial freedom!