The short answer to what I know about student loans is this: ABSOLUTELY NOTHING.
And the mid-sized answer is this: I had more than $19,000 in student loans, and now – after close to a decade of repayment – I have $1,600 left. Everything I know about student loans, I learned by screwing up. If you want to learn from my mistakes, please read on.
So here’s the long answer:
I have two university degrees. Here’s proof:
My parents paid for a large portion of my first degree, the extremely useful English lit degree.* During my childhood, my parents saved about $25,000 for my post-secondary. (I don’t know the exact figure; when you’re spending someone else’s money, the amount is less important than when you spend your own.) They aren’t rich people, so this was most likely socked away $100 at a time.
What do you say when someone saves this much cash for you? Um, gee, thanks, guys. You get decent grades and do your best to complete your education.
My mom also made me apply for a small loan: $4,000. Her motives were vague, but she was insistent. My guess is that she wanted me financially invested in my own education. I respect this idea – especially since I’m saving for my own child’s education now. (Here is another way that one can say thanks for all the money one’s parent(s) ponied-up for an education…by paying it forward to the next generation. I’ve saved $13,000 for my daughter’s education so far. That might account for one textbook by the time she gets there [she’s 8], but it’s better than nothing.)
Since I “squandered” all of my parents’ generous education fund on a liberal arts degree, there was nothing left when I went back to school for a more practical journalism degree.** For this endeavour, I needed a student loan. And I thought: Oh, whatever, I’ll just pay it back whenever. Whatever. Whenever.
I added another $15,000 to my student loan, and wound up with close to $20,000 to pay back to the federal government, the provincial government and a bank (how student loans used to be distributed).
I used to think I would NEVER pay it back. I felt crushed by it, especially when there were many other things I could’ve spent my $250 payment on each month.
Lest this blog post take on the length of an English 110 final essay, let me get to the point. This is what I wish I’d known before I’d started paying back my loans:
1) Ditch Your Whatever Attitude: Until two years ago, I was on autopilot regarding all my finances. I thought, even though I’d been making payments every month, that my loan was still $20,000. That’s how disconnected (and dumb) I was. When I looked up the actual total, I realized my collective student loans had been chipped away to $14,000. I got excited. If I could reduce the sum by $5,000 without even trying, what would happen if I tried? So I tried. I found a part-time job (in addition to my full-time one), and I used about 75 per cent of the earnings towards my student debt. That’s how it went from $14,000 to $1,600 in two years.
2) Don’t Delay The Inevitable: In the last year of my journalism degree, I got pregnant. (Long story. Read it here.) I graduated, but I wasn’t employed full-time initially. I applied for interest-free relief from my loans…for 36 months. I felt like I was getting away with something. But all I did was delay reality. Maybe I didn’t have $250 each month back then, but I know I bought clothes, ate out, etc. Maybe if I’d cut out a few things I could’ve started decreasing my loan sooner, and it wouldn’t have taken me almost 10 years to pay it off.
3) Avoid Other Debt: Another reason it’s worn on so bloody long is that I started amassing consumer debt, via my credit card. Stupid. Everytime I experienced a magical windfall – like a tax return – it was eaten up by my credit card balance. And then I would just bring my credit card back up to the same level (or higher). Until I learned how to use my credit card, I could never get ahead on my student loan. I was my own worst enemy.
4) Have A Plan: Ideally, you should plan from the very beginning. Plan how you’re going to pay for your education. Not just year one, but the entire thing. Will you have loans? How much? Will you work part-time? (Unless you’re studying to be a medical doctor, your answer should be yes.)
Your plan should also include exactly how you’re going to pay back any loans you might acquire. Don’t use the Whatever/Whenever approach. Trust me: it does NOT work. Seek help from a real financial planner. The Canadian government is recommending you seek this kind of help, anyway.
Don’t take my word for it. After all, I have an English degree. What the heck do I know about money?
*I write this with no hint of sarcasm. As a professional writer, I use the skills earned during this degree every day of my life. I’m using them right now. I use them when I write an email to my boss, and I use them when I write cover letters and resumes. So there. Shove your smirk.
**This was in 2002, back when a journalism degree was considered practical. If only I knew 2008 was coming, I might not have been so damned smug.