Don’t Let Student Loans Ruin You

Today’s high tuition costs necessitate loans for many college students.  Loans have become so common that hardly anyone thinks about the consequences of this debt.  It’s a smart investment in your future, right?  Not always.  First, interest on loans is accruing daily (once you graduate for subsidized and while you’re still in school for unsubsidized).  Over the payment period of your loans, you can pay thousands in interest alone.  And unlike other debt, student loans cannot usually be discharged in bankruptcy.  With no guarantee you’ll find a job in your field, why take on such a burden?  Before you decide to take out loans, read on for how to prevent crippling debt. And if you’re already overwhelmed by student loans, learn how to take control of the debt before it’s too late.

Preventative Measures

  • Maximize scholarships and grants –  Every small scholarship adds up.  Search for scholarships specific to your degree program or your hometown.  This will reduce the competition because these smaller scholarships are often overlooked by students. Visit to search for scholarships by different criteria.
  • Inquire about work/study opportunities – The Federal Work Study Program allows undergraduate and graduate students to earn funds through part-time work.  In order to receive federal financial aid, including work-study funds, grants, and scholarships, students must fill out a Free Application for Federal Student Aid (FAFSA).
  • Make tuition a factor in choosing a school – You don’t have to go to a private school to have a good college experience.  Public colleges and community colleges can offer the advantages of small private schools without the ridiculous tuition prices.  Read how to have a private college experience at a public college price.
  • Live like a student – Some students use loan money to cover non-educational expenses.  While in school, you’ll  need to reduce your living expenses as much as possible so that loan funds can be used for tuition and books only.  Take on a roommate or stay in the dorms to reduce your housing expenses.  Earn extra money by tutoring or freelancing.

Damage Control

  • Understand your debt – Instead of letting someone else calculate what you owe and your payments, do it yourself.  Figure out what you’re paying in interest daily by multiplying the interest rate on your loan by the principal balance and dividing by 365.25.  For example, if you have a principal balance of $20,000 and an interest rate of 6.80%, your daily interest will be ($20,000 x .068) / 365.25 = $3.72.  Set up an Excel spreadsheet for your loan calculations or use the loan payment chart generator at
  • Payoff high interest loans first – As soon as you have income, make paying off your highest interest loans a priority.  If you’re able to make more than the minimum monthly payments, do it. Don’t let the interest pile up so much that you can never make a dent in the principal.
  • Consider discharge options – If you work in certain professions, you may be able to get your loans discharged or reduced.  For example, teachers working in low-income areas may have their loans forgiven or cancelled.
  • Learn the pros and cons of consolidation – Consolidation can have a positive or negative effect on your financial situation.  One major disadvantage is the possible loss of discharge and other benefits when you consolidate.  You may also be charged a penalty for prepaying.  However, consolidation can also simplify your payments and allow you to pay off your loan sooner. Read about the pros and cons of consolidation to determine if this option is right for you.

You don’t have to rack up huge loans to get a good education.  Loans, grants, and work/study funds can go a long way if you take advantage of all the options available.  Read The Ultimate Scholarship Book 2011: Billions of Dollars in Scholarships, Grants and Prizes to find scholarships you may have overlooked.