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 owe around $30,000 just in interest!
That’s how much the average student graduates with in total. 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 your child is in college or is preparing to go, use my mistakes as a lesson so they can graduate in a better financial place than I did.
Mistakes I Made Before I Took Out My Student Loans
1) 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 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 earn one, so I never tried.
Who knows how much help I could have missed out on?
If your child is a decent student (and even if they’re not), I highly encourage they apply for several scholarships so that they have a chance to earn some money for college and in turn will need fewer student loans.
They have nothing to lose but a little time filling out applications.
Even if they don’t earn a scholarship, they will never have to wonder if they’ve made a mistake by not applying in the first place.
2) Not Checking Interest Rates or Understanding How They Work
I really really wish I had understood interest and had investigated interest rates.
While the rates on federal loans are set, the rates on private student loans, even fixed-rate loans, can change according to parents’ credit history.
I only had one loan through Sallie Mae because, at the time, students who lived off campus couldn’t take out federal loans. That rule changed the following year.
It was then that I should have applied for loans with various providers to get a better interest rate.
I believe my interest rate started at 7 percent but right before I refinanced in 2016 it had climbed to 11 percent because it was a variable-rate loan, and I didn’t have any control over the fluctuations as I would have with a fixed-rate loan.
I also wish I understood that, aside from subsidized loans, that interest starts to accrue from the moment the loans kick in. I only thought about interest after graduation.
It kept accruing when I dropped to part-time status for a short period and in times of forbearance and deferment. Interest never stops accruing until the debt is paid.
If your child hasn’t taken out loans yet, I highly recommend they shop around when considering private loans and keep an eye on that interest!
3) Lack of Research Into Schools and Majors
This was probably one of my biggest mistakes that I hope your child can avoid with their 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.
The second school was also not a good fit (too strict a curriculum) and I then switched to the school that I ultimately graduated from.
I was equally as unprepared when it came to choosing a major.
It shifted a bit from animal science to wildlife biology, and then finally I created my own major which consisted of wildlife and other science classes, and hands-on internships.
Because of my lack of research and these two occurrences, I lost credits switching schools and majors which meant I lost money.
A lot of money.
If your child is getting ready for college, they should do their research on which schools can give merit scholarships, which schools they would fit well in, and figure out what major they will be happy with.
This will save them so much money as well as time.
If your child is currently in college and thinking about switching majors or transferring schools, think very carefully and don’t make the change lightly.
Putting some effort into their research to figure out how much money they would lose before they make the switch.
Only do so if it’s something they know they will stick with once they make the change.
Mistakes I Made During College
4) 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 it was not recommended to do outside work.
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 your child is still in college or getting ready to start college, have them plan to make at least some amount of payment to their student loans while enrolled.
I can’t stress this enough.
They will be in such a better place financially when they graduate if they have been making any kind of payments.
Living as frugally as possible while having student loans to repay is something to consider.
Especially if they don’t have a job while in college.
And if they do have a job, they should put whatever they don’t need towards the repayment.
5) Never Creating a Budget
It wasn’t until last winter that I finally figured out that I needed to budget.
Until then I just checked my bank account and made sure I didn’t dip too low in funds.
“Just watching” 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 percent 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.
Your child should start a budget now, even if they are a junior or senior in high school and don’t yet have a job.
They can budget whatever allowance they make or birthday money they get to track what they bring in and spend.
The sooner they start, the sooner they will begin making better financial decisions (though it is never too late to learn).
Wherever your child is in their college journey, have them choose a budgeting program and start budgeting today.
6) No Plan for Faster Payoff
When I took out my loans I knew I had a ten-year repayment term.
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: 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
7) Not Understanding Capitalization
Did you know that when student loans enter repayment the interest capitalizes? I sure didn’t! That information hit me like a ton of bricks. I was now paying interest on my interest!
Your interest will also capitalize when you switch repayment plans or finish a forbearance or deferment period.
If your child finds themselves needing to postpone payments after graduation, they should try to at least pay the interest during this period so they don’t have to pay interest on their interest.
8) 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 students graduate they have a six-month period in which they don’t need to make payments.
This allows people time to get a job after college.
This is all well and good, but:
- they could be using this time to make progress on student loan debt and
- their interest is going to capitalize at the end of the six months, so they are just adding six more months’ worth of interest to their loan total.
Instead, they should be making payments on all their student loans or can get strategic and start putting money towards the lowest amount (snowballing debt payments) or to the 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.
Please use my experiences as a lesson and avoid the same mistakes that I’ve made.
By paying attention to details, budgeting, and reading the “fine print,” your child can graduate from college in a better financial place and not be saddled with six figures of student loan debt.
Student loans are seemingly simple to obtain, but they are so hard to get rid of.
I wish you the best of luck with your child’s college career and financial journey!
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