Do you wish you had a time machine so you could go back and make different decisions about your student loans?
If so, you’re definitely not alone. The fact is, student loan regrets are very common. Mostly because borrowers often don’t understand the long-term consequences of their student loan choices.
Seven borrowers recently shared their student loan regrets with us, and what they wish they’d done differently if they could turn the clock back. Here’s how these borrowers are managing student loans today and what you can do to avoid their student loan mistakes.
6 borrowers share their biggest student loan regrets
1. I deferred payments for years
Tasha Mayberry-Mullyakaev, the founder of web design, PR, and marketing company Social Media 22, couldn’t afford to pay her student loans after graduating. She thought that deferring would save her credit score, but really it caused her $40,000 student loan debt to balloon to over $70,000.
Mayberry-Mullyakaev learned the hard way that ignoring student loan payments meant her debt would just keep increasing. Due to compound interest, unpaid student loan debt will only continue to grow.
Therefore, if you can’t afford your federal student loan monthly payments, consider an income-based repayment plan. You can also punch in your loan info into our Student Loan Income-Based Repayment (IBR) Calculator to see if this is a viable option for you.
As Mayberry-Mullyakaev says, “Know how much you are borrowing and what payments will be.” Essentially, you’re better off doing the math sooner rather than later so you have a manageable plan for paying student loans.
2. I didn’t refinance my loans when I could
“My biggest regret is not refinancing my student loans,” says Zina Kumok, a freelance writer who specializes in personal finance. If she had refinanced, Kumok says, she could have saved hundreds.
Her advice? “I tell everyone who’s paying high-interest rates to consider refinancing, unless they’re trying to have their loans forgiven,” Kumok explains.
Refinancing your student loans can lower your interest rates and reduce your monthly payments. And private lenders allow you to refinance both federal and private loans.
What’s more, refinancing can often save you thousands of dollars over the life of your loans.
Despite her student loan mistakes, Kumok was able to bounce back. She managed to pay off $28,000 in student loans in just three years.
3. I spent my loan money on shopping sprees
Student loans are not free money, a fact that some students learn the hard way.
For instance, Stephanie Caudle ended up spending her loan money on shopping sprees. Says Caudle, “I had no idea that the same check I anticipated would be a check I would someday have to pay back.”
If she could do it differently, she would have “started saving money to pay back my student loan debt before I even graduated from college.” Today, Caudle is a freelance writer and founder of Black Girl Group, a micro-job platform that connects African American women with freelance opportunities.
Chantel Blake also regrets spending her loan money on frivolous expenses. She took out the maximum amount available and spent the remainder on a trip to Europe. Now, Blake runs Breaking Up With Debt, where she works as a personal finance coach helping others avoid her same student loan mistakes.
Caudle and Blake are not alone in spending student loan money on personal activities. A recent Student Loan Hero survey showed that the class of 2017 was twice as likely as the class of 2016 to spend loan money on non-educational expenses. In the end, all that pizza and beer had a much higher price tag than students realized.
4. I had no idea how much I was taking out
Like many students, Phil Risher, founder of the Young Adult Survival Guide, took out student loans without a second thought.
“My biggest student loan regret is not knowing the amount of loans I was taking out each semester,” Risher says. When he was faced with paying them back, he got a big wake up call.
Risher wishes he’d reached out to his college financial aid office sooner to discuss repayment plans. He advises anyone taking out loans to come up with “a proactive approach to taking on debt.” Wherever you are in life, it’s not too late to track your debt and come up with a plan to conquer it.
5. I paid for a degree I don’t use
Blake is also a student loan borrower who wishes she’d done a cost-benefit analysis before getting her Master’s degrees, especially because she ended up with over $75,000 in student loans. Yet, three years later, she’s still not working in the industry in which she got her graduate degree.
Before taking on student loans to finance an expensive degree, consider the return on investment. A graduate degree should advance your career and lead to a higher salary. Therefore, consider whether the benefits of a degree will outweigh its costs.
6. I used my loans to go to an expensive college
Nikki Koontz didn’t hesitate to take out loans for her four-year college and a year-long study abroad experience in London.
However, Koontz says she “had no idea how much anything cost or any concept of compounding interest.” The result, unfortunately, was “off-the-charts ridiculous” student loan debt.
“I will be paying off my loans with a very high monthly payment for the rest of my life,” says Koontz. “It’s a huge burden that I wouldn’t wish on anyone.”
As the Assistant Director of Marketing at Southern Utah University, Koontz now helps students avoid her student loan mistakes. While she’s a strong proponent of higher education, she encourages students to speak with financial aid advisors before taking out loans.
“Get all the facts up front,” says Koontz. “Try to find scholarships or work study opportunities. There is a lot of unclaimed money, but you have to be willing to work for it.”
Recovering from student loan mistakes
Most borrowers make mistakes with their student loans out of a lack of financial literacy. They often take out loans without understanding the long-term consequences of student loan debt.
Just as importantly, consider the return on investment of your degree. Remember, you won’t be able to pay back student loans without an income.
And if you’re dealing with the fallout of student loan mistakes, you definitely have options for managing student loans and getting your finances back on track.
Student loans are a huge burden. But by sharing both our mistakes and successes, we can work together to resolve the current student loan debt crisis in America.
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|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for Discover.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.
4 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).
5 Important Disclosures for Citizens.
Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of February 1, 2020,the one-month LIBOR rate is 1.66%. Variable interest rates range from 4.22% – 7.81% (4.22% – 7.81% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.36% – 7.95% (4.36% – 7.95% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown for eligible, creditworthy applicants with an undergraduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discount of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance,including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
Citizens Bank Student Loan Eligibility: Borrowers must be enrolled at least half-time in a degree-granting program at an eligible institution. Borrowers must be a U.S. citizen or permanent resident or an international borrower/eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For borrowers who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank- participating school.
Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
|2.84% – 10.97%1||Undergraduate, Graduate, and Parents|
|2.75% – 10.65%*,2||Undergraduate and Graduate|
|2.80% – 11.37%3||Undergraduate and Graduate|
|3.52% – 9.50%4||Undergraduate and Graduate|
|4.22% – 7.81%5||Undergraduate and Graduate|