This is the second instalment of the ‘Money Myth Series’ from the Smart Woman blog. We discuss misconceptions young people have about money management and help them see a different perspective on the subject.
Money Myth #2 – Student Loan is Good Debt
If you have student loans or are thinking of borrowing loans, have you ever heard any (or all) of these before?
- Student loan is good debt.
- Student loan is a normal part of going to post-secondary school.
- You will pay off your loans quickly after you graduate and find a good job.
- The government is lenient with you when you borrow student loans – sometimes, they will pay it off for you!
- Student loans don’t matter that much because they are low-interest and interest on them is tax-deductible.
DON’T BUY INTO IT… JUST DON’T!!
All these things are are justifications for acquiring cheap debt. It is still debt that you borrow and debt you will need to pay back; whether with money plus interest, service or time spent working for the government, or opportunities you’re missing due to carrying this debt.
What’s so wrong with buying into this mindset?
The simple answer is that it makes you believe it’s okay to borrow this kind of debt.
Why? Because it’s not as bad as other kinds of debts you could get yourself into (like credit card debts with high interest rates or a car loan).
And you’re using it for school (aka an investment in yourself), so it’s okay to borrow it. You might complacently do so believing any or all the aforementioned bullet points at the top of this post. God forbid, you might actually think it’s okay to buy a damn BMW to get you to school or travel to Las Vegas EDC on student loans for “educational experiences”… It isn’t.
I hate when people label “student loans” as good as if there aren’t any other alternatives to pay for post-secondary. It doesn’t teach young people the right impression. If there was a scale on evil to less evil of debts, student loans would definitely rank towards the “less evil” side. So maybe, we should call it that… student loans are one of the “less evil” of debts.
If you really need to borrow, I recommend that being at the bottom of your “How to pay for school” list while looking at other ways you can avoid it altogether or reduce student loans. The only reason I feel so strongly about this is because I borrowed over $40k in student loans believing that I’m borrowing good debt. Now I’m dishing out about $1k a month in payments OR carry this debt for 9.25 years!! (I opted for the $1k a month payments because I want this debt gone in 3 years)
Related Posts: I Will Pay Off my Student Loans in Less than 3 Years
I want YOU to be smarter about student loans than I was!
After all that, I would count myself lucky because I graduated with a degree in 4 years and got a great-paying job right out of university. Others are not so lucky. Some students have been in school for over 7 years without a degree jumping from program to program. Some graduate and are unable to find a job right away. Or some graduate, find a job and then realize that it doesn’t pay too great. These are all very real scenarios you can find yourself in.
And in all these scenarios, you are better off with no student loans (or as little as you can make it).
Related post: What I Would’ve Done Differently with my Student Loans
Smarten up my fellow young peeps…
Develop the mindset of avoiding student loans as best you can and work as hard as you can to pay off student loans if you have them. Here’s a kicker, hold on to your seats there… you CAN graduate with $0 student loans. I know people who have done it.
But if you do need to borrow, use your loans only for education-related stuff! No exceptions! You might think this is a no-brainer, but you’d be surprised. That point about buying a BMW with student loans, that’s a true story – someone’s actually done it! If you need to buy a car, work a job for it. If you want to travel, save up for it.
You will be so grateful to your student self once you finish school and/or enter repayment on your loans.
Student loans is
good still debt!
How about you? You ever run into this money myth before?