When 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.”
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.