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A Debtor's Education.
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Author: Schulte, Bret
Section: Money & Business
Paying For College
$17,000 in student loans, and all I got was this lousy bowling shirt
I made my first major
purchase when I was 18 years old. I had no money. No collateral. No
full-time job. And, most significant, no idea what I was doing. As with
countless others, my first major purchase was my college education.
When I graduated in 1999, about 65 percent of my classmates, like me,
had paid for their education with student loans. And why not? The
federal variety (about 96 percent of all student loans) carries low
interest rates and is far easier for college kids to acquire than a
decent-paying job.
At my alma mater, the
University of Nebraska, student loans were as commonplace as antipathy
toward Oklahoma. The only time I gave mine any thought at all was once
a semester when the check came. I paid off my tuition and took the rest
to O Street, a snare of restaurants, shops, taverns, and clubs a block
off campus. No slacker, I worked as a telemarketer, line cook, and
college journalist. But I counted on my loan not just to pay for
tuition but to help finance my college lifestyle, including books,
beer, food, music, and a too-small bowling shirt with a Pabst Blue
Ribbon logo on the back.
Fantastic plastic.
I loved my student loan. Still do. But it hasn't all been a party. In
fact, part of the problem is exactly what makes student loans great.
They're so easy to obtain and so encouraged as an investment in your
future that you can forget to take them seriously--especially when
you're a teenager. What's more, the type of loan you get has little to
do with you and your career plans and much to do with your parents,
specifically their income and number of dependents. Students from
families with greater need qualify for subsidized loans, on which the
interest is waived while the student is in college. I got the worst of
both worlds: My family was not deemed in need (despite the fact that my
dad buys T-shirts with motor oil box tops), and I ended up a reporter,
not the most lucrative of careers. By graduation, I owed about $17,000,
including mounting interest; the average for my class was some $19,000.
But that wasn't all. I had also racked up $3,000 on a credit card,
thanks to an interest rate almost triple that of my student loans.
After college, I
tried to be more responsible with money. Almost immediately, I
consolidated my loan, as was recommended at the time, and locked myself
into a 7.25 percent interest rate. Bad move. Last year, rates dropped
as low as 3.37 percent. (Now that interest rates are climbing again,
consolidating as soon as possible makes sense, experts say.) And I used
the six-month postgraduation deferment on my student loan to pay back
MasterCard. Meantime, interest on my student loan was capitalizing.
Now, almost six years have passed since I left Lincoln, Neb., and I
find that I have made little progress on my student loan.
Although I'm putting
more money than ever into repaying the federal government, I honestly
can't say I think much about it. Even now. And I know I'm not alone.
Lots of my buddies have taken a leisurely approach to their student
loans while they pay off other debt, buy cars or homes, or travel the
world. One friend, who is admittedly no financial whiz, has been paying
the minimum on his student loan for years while tackling credit card
debt and car payments. Because no one cosigned the loan, he reasons, it
dies with him. It helps that the government is so flexible in payment
plans. Of course, the interest keeps accruing.
Without a doubt,
federal student loans are a wonderful way to pay for college. And
despite having paid $17,000 for an English literature degree from a
school more famous for dominating in football than in the liberal arts,
I wouldn't have it any other way. Except for one thing: I wish the
seriousness and responsibility of my loan had been impressed upon me as
a young college student. If I had fully understood that I faced a
decade or more of debt, I might have blown less on ski trips to
Colorado and concerts in Kansas City. But in truth, my student loan
hasn't affected me financially nearly as much as my choice of career.
Will my student loan debt prevent me from buying a house someday? Not
if my credit is good. Will my modest salary in Washington, D.C., one of
the most expensive real-estate markets in the country? It sure has so
far. At the very least, I can take solace in my Pabst Blue Ribbon
bowling shirt. That, as they say, is priceless.
PHOTO (COLOR): The author wishes he hadn't consolidated his loan at 7.25 percent.
~~~~~~~~ By Bret Schulte
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