Were You Warned About Student Loans?

Debt ball and chainWhen I was getting ready to go to college, no one was talking about the important information about student loans like interest rates, payoff plans, deferment, etc. And the “entrance counseling”? What a joke! “Here is a 12 page document in 4 point font, read it and check the box to agree that you did.”

Riiight.

For me at least, I felt like I had to go to college and the only way I was going to be able to pay for it was through student loans. I was a naive 17-year-old who had just received my acceptance letter after 6-7 months of going through the application process.

I filled out the loan application and promissory note as fast as possible -“just get me into college already!” No one explained whether I had a variable interest rate, that it would take me 25 years to pay them off if I paid the minimum payment, or how interest would accrue on top of interest.

Of course the information was there, but in very small font somewhere hidden in the middle of the document. I was too excited to read the whole thing and wouldn’t have even known what to look for even if I did. It’s not like I had a choice anyway, I had to get student loans to pay for college, so what was the point in reading some boring legal document?

This would be a perfect time to start playing Cher’s “If I could turn back time.”

Who in their right mind would hand a 17-year-old high schooler a contract and have them suggest how much money they wanted to borrow?

My first semester of college cost about $5,000 in tuition. My first semester’s loan amount? $12,500.

It was so easy. Write down a number, and about a week later you got an email: “Congratulations, you’re approved!”

The first $5,000 went to my school, the remaining $7,500 went straight into my bank account. (I can’t even spend that much in in four months now if I tried!) I now had this huge cushion of money in my savings account to spend on anything I wanted.

At the time, I didn’t realize that so much interest was accruing on this money every day. The only place money grows on debt? When you’re the lender and it’s not your debt.

I don’t want to keep boring you with my sob story. The point is, please be aware of what you are actually getting yourself into. And like they always say, if it’s too good to be true, it probably is. Paying your way through any major purchase with cash is definitely the way to go if at all possible.

Because remember – Money doesn’t grow on debt.

 

Photo by StockMonkeys.com

How to Start Erasing Your Debt

Erase Debt Once and For AllI want to start out this blog by giving you some quick tips on how to begin the journey of getting out of debt. This isn’t going to be easy, but it will be worth it.

Here are a few tips to get you started:

1. Get yourself together. Gather all of the information you can about your current debts (balance, interest rates, minimum payment amount, etc.)

2. Create a list of these debts to help you visualize where you stand and help you to add them all up. I use Personal Capital to see exactly what is going with my financial mess at any given time. This will help take away that cringe-worthy moment that happens when you receive your bills each month. I know this is a hard step and you may have been putting off.

This is absolutely essential to your success. If you don’t put everything together now and really see what you have going on, it will take you a heck of a lot longer to pay off the debt you currently have. This is the start of a new beginning, and that means that you have to start being honest with yourself.

3. As scary as it may sound, calculate your current net worth. Here is my ultimate guide to calculating your net worth.

My current net worth is a whopping negative $41,758.79. When I first figured out this number, for some reason I was shocked. I was completely devastated and felt like a failure. How could I be a college graduate and be in the negative? It just didn’t make sense. I had never really thought of my student loan debt as having that big of an impact financially speaking. I know it sounds crazy and you’re probably saying, “well duh Chenell, you accrued over $60,000 in student loan debt, of course your net worth is in the negative.”

And you’re right, but I never really understood the severity of the situation until I put it in front of my face like that. I think it’s important you do the same.

4. Now that you understand your personal mess (or should we now call it “your organized financial picture” 🙂 ) I want you to think of how you’ll feel once you pay off all of your debt. Think of how freeing it will be to not have to give any portion of your paycheck away to a creditor. Once you pay off your debts, you will truly be able to live. These thoughts are what keep me going when I’m feeling like giving in and buying something ridiculous.

5. Get your spouse involved. Tell your family what you are trying to accomplish. Tell your friends that you are in debt and are going to need their support to choose budget-friendly outings. Although, if you’re like a lot of typical Americans, your friends are in debt too. This will either make your time getting out of debt a whole lot easier (because you can show them the light), or it will be just as hard as it’s been for you in the past. Either way, you need to make it clear to them that you are trying to get ahead in life.

Some of your friends will be supportive. Others will laugh, and say that payments are just a way of life. They may even tell you that you’re crazy and should spend your time more wisely. But you can rise above, because money doesn’t grow on debt.

 

Photo by Images_of_Money