Most people today are aware that they have the option to take student loans when they attend college. This money can be used to pay for college expenses, and other things related to your higher education. You only need a couple of clicks on the site of your university, or financial aid website to apply for a relatively quick loan that can get you up to 15k dollars.
Still, there is a constant problem that arises from student loans. Given the fact that students can get them easily, they take these loans lightly and they think that returning them will be just as easy. Because of this attitude, people tend to make poor financial decisions and simply spend all of this money on the wrong things.
Today, it’s not an uncommon sight to see a lot of students that graduate with big debts they are unable to return for a long time and all of this because of their negligence. In this post, I will talk about some of the most common mistakes people make when they take student loans and how they get themselves in these difficult situations.
1. Not thinking about how you will pay off your loan
One of the biggest mistakes people make with loans in general is that they simply take them without even thinking about how they are ever going to pay them back. No matter if we are talking about student loans, guarantor loans or business loans, you need to have a plan for paying it back as soon as possible.
A lot of people forget about the fact that they need to be proactive and work on reducing their debt over time, inch by inch. Don’t let yourself think something like “I’ll get to it when the time comes”, because this can be a heavy burden that might greatly complicate your life.
Create a plan and make sure that you pay off a small amount each month, once you get up on your feet and have a steady income. When you create this kind of habit, you will even forget about your debt and the money you are paying off regularly, and when you look at your remaining debt, you will be surprised at how much you’ve cut it.
2. Starting college for no reason
A common mistake that people always make is that they go to college and take loans because they need money, but they don’t know why they enrolled in that college, nor do they really have a lot of interest in it. Getting into college with no motivation, goal or purpose for your higher education means that you might not be willing to sacrifice a lot of things and work hard on getting your degree.
If you’ve signed up for college to “find yourself”, then this undertaking is going to cost you both time and money. If you get a student loan, you will be pressured even further to finish and get a degree, and if you realize that this college is not the right one for you, it will be very difficult for you to achieve these things.
Finishing college is not an easy feat, even for those who are certain that they’ve chosen the right university and who know what they want to do in their lives. Imagine just how difficult it is if you are studying something you are not really interested in and you also have a debt on your back.
3. Using loaned money to pay for something else
The last common mistake with student loans is that people get their loans to pay for extracurricular activities which are not related to their education. As a student, when you borrow more money than your tuition costs, your university will issue you a refund check for that loan. The best thing you can do in this case is to use the check to pay off your student loans, because this is ultimately borrowed money.
However, the majority of college students will rather use this money for summer vacations, parties, shopping or simply spend it on everyday expenses or better campus accommodation. These are risky expenses and they won’t bring you anything in the long run, especially when you make them with borrowed money.
If your college gave you a refund check, you don’t have to be in a hurry to spend all of it. Be aware of the fact that you still have a loan to pay off and that it has interest on it that will keep piling up.
The best thing, of course, is to avoid borrowing money, but not everyone has the money to finance a college education on their own. Still, if you do take a loan, make sure that you prepare yourself in advance and create a plan for paying it off. Make sure that you don’t make these mistakes, but learn from other people’s experiences instead.