Borrowing more money than you need to for college or for non-education expenses can jeopardize your financial future and bring you stress and disappointment. Make smart decisions when it comes to borrowing for college to avoid future pitfalls. Keep these overborrowing problems in mind:
1. You have to pay interest too.
Most students delay loan repayment until after college, meaning that interest builds up during school and increases the amount that must be paid back. If you use student loan money for unnecessary things, interest will accrue on that money too before you even start repayment.
2. Repayment can take longer.
If your monthly payment is more than you can afford after college, you may have to look at alternative repayment plans. These plans may reduce your monthly payment but extend over more months, which will lead to you paying more interest over time.
3. Missed payments will have consequences.
The more you borrow, the more you will have to pay back every month. If you are unable to pay your bills and miss payments, your credit history will be impacted negatively, which may lead to higher interest for future loans and credit of all types.
4. You may have to limit entertainment expenses.
The more money you have to pay back on your student loans each month, the less you will have for entertainment. When you look back, will you think using student loan funds for one spring break was worth it when it seems like you can never afford to go out to dinner or a ballgame with friends?
5. You may need a second job.
To pay your student loans after college, you may have to find a second part- or full-time job. A second job may help with your bills, but it can impact your personal life, the attention you pay to your primary job and your overall health.
6. You might delay buying a house or starting a family.
Numerous reports show that adults with high levels of student loan debt put off traditional adult milestones, such as purchasing a home, getting married or starting a family due to economic distress.
7. You may be unable to save for your future.
Saving for your future, especially your retirement years, will be essential once you start your career. But if you’re unable to contribute money to a 401(k) or other retirement fund because you are repaying student loans, you may miss out on a decade’s worth of saving and have to work longer than you would like during your lifetime.