Interest on Student Loans is Your Enemy

You probably have lots of friends in your life. But I promise you, interest on your student loans is not one of them.

Interest on student loans is your enemy. And the only way you can kill the little bastard is by making sure that your monthly payment is big enough to pay the interest for the month plus as big a chunk of the principal as humanly possible.

Tuition.io wrote a great post that will help you learn more about how interest on your student loans really works. You’ll do yourself a big favor to read it now.

Interest on student loans works different than what you may be accustomed to on credit cards or cars.

VERY different.

Especially if you are on one of the programs that provides you a “low monthly payment”.

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Student loans make college tuition even more expensive

One of the discussions among those advocating for student loans is that the government needs to make low interest student loans available to “help students and their families better afford tuition costs.”

The problem is that student loans don’t make tuition costs more affordable.

In fact, it’s probably more accurate to say student loans increase the cost of tuition. It puts interest expense over a long period of time on top of the tuition costs.

Debt makes college tuition even more expensive than it already is.

And there are many voices out there that would say that the huge increase in tuition costs over the last ten years is at least partly a result of the government making student loans so easy to get.

A Student Loan is Not an “Award”

Here is a quote from an article by Janet Lorin at the San Francisco Chronicle on May 6, 2012

When Susan Romano first read her son Zach’s financial aid letter from Drexel University, a private college in Philadelphia, her eyes immediately jumped to the line highlighted in yellow: “$13,442 expected payment” for the first year at the $63,000-a-year school.

“At first, I thought it was great,” says Romano, an insurance claims representative from Huntingdon, Pa. “The more I read it over and over, the worse it got.”

It turned out the college’s “offered financial aid” included $42,000 in loans to be taken out by the family.

“A loan to me is not financial aid,” says Romano. “It is money I have to pay.”

Colleges try to make it sound so nice to be “awarded” a loan. Reality check – it’s just marketing lingo.

Taking on student debt is not an award.

If you can’t afford tuition, you can’t afford tuition.

Taking on debt to make the tuition payment doesn’t make it affordable.

A grant, or some other form of benefit that actually reduces the amount of tuition you have to pay, would make it more affordable. Providing you a student loan doesn’t.

Making tuition more affordable for you and your children is all about saving money, searching out grants and scholarships, choosing schools with lower tuition and a host of related activities designed to allow you to pay for school—not borrow and mortgage your future with student debt.