Financial Mistakes that Led Me to $148,000 Worth of Debt
3 things I would do differently if I could do it all again.
Student debt. It is crippling.
But if you have it, try not to let it dissuade your financial goals and journey.
Everywhere I turn, my peers have some level of student debt in some form or another.
It is quite quickly becoming part of the United States college experience. Per analysis of US census data, approximately 1 in 8 people in the United States carry student debt.
Unfortunately, I am one of those people.
For both my Bachelor’s and Master’s degree, I took out the maximum amount of student loans. These loans covered my tuition, books, rent, and living expenses. Because of this, I neared ~$148,000 total in student debt.
I recently graduated and my loans are no longer in deferment. They are starting to take their toll.
As I create my extremely tight budget to be able to pay off my loans and attempt to save at the same time, I cannot help but regret a few financial decisions I made in college.
That being said, here are 3 mistakes I made that if given the chance, I would have do differently.
Take it from me, someone who feels as if they’re drowning in debt.
1. I Did Not Take Out the Bare Minimum for Tuition & Fees.
If you are considering taking out student loans for your next academic year, I am practically begging you to only take out the bare minimum for the year.
This means, only borrow what is required for tuition and fees.
This is my biggest regret that I made in college. I took out the maximum amount of loans for the purposes of having money for living expenses and rent.
In retrospect, this was the silliest thing I could have ever done. It is not as if I was not working or did not want to work. I worked three part-time jobs since my second semester of university.
I could have easily paid for rent, grocery bills, and even had a little left over for frivolous spending with my part-time jobs. Since I started with max loans, I got used to the comfort.
It made me feel as if the money I was making was actually my own to use however I wished. Oh boy was I wrong.
To help put it into perspective for you, each year of my undergraduate and graduate degree, I borrowed the maximum amount allowed, $22,000 and $30,000, respectively.
Each undergraduate semester cost ~$7,000 roughly and graduate semester cost ~$11,000. My loan refund from the school after the tuition and fees were paid was ~$4,000 for each semester. This was used for textbooks, living expenses, and housing.
Now let’s do some math:
For all 6 years of university, the actual cost of tuition and fees were:
($7,000 x 8 semesters) + ($11,000 x 4 semesters) = ~$100,000.
I borrowed $148,000 in total.
$148,000 - $100,000 = $48,000.00
That is $48,000 of student loans that was for “living expenses” over the span of 6 years. Let me break it down even further to show how this was completely unnecessary:
$48,000 of “living expenses” / 6 years = $8,000 of borrowed living expenses per year.
The point I am trying to make is that even at minimum wage of $7.25, you would make $8,000 before tax in 1 year working a little over 20 hours per week.
But, you are in university now, perhaps you secure a job with a higher hourly rate, it will only make things easier and you can more easily make $8,000, even more to make things more comfortable.
All of this to say, I regret taking out loans for living expenses. They were 100% unnecessary for me. I urge you to assess your situation and whether or not working during school is accessible to you. If it is, adjust your loans accordingly.
2. I Did Not Pre-Emptively Pay My Loans
I mentioned before that ever since my second semester of university until I graduated from my master’s program, I worked 2–3 part-time jobs.
I was a teaching assistant for different classes, did research in one of my department’s labs, worked in a restaurant, with internships sprinkled in and even started my first ever full-time job with a SALARY during my graduate program.
To say the least, I was making on average ~$15,000-$20,000 before taxes each year working.
From our previous calculations, this was clearly more than enough to support my “living expenses” that I took loans out for.
Even worse, I did not even use this money to start paying off my loans early. They were gaining interest but none had matured to where the interest became part of the principal.
I could have mitigated so much interest to this day if I had started paying off my loans during the year.
To make the numbers simple, let’s say I took ~$12,000 of what I made each year for living expenses (for some added comfort instead of $8,000).
That would have left me anywhere from ~$3,000-$8,000 left over. I’ll average that out to $5,000 for the purposes of estimation.
$5,000 left over x 6 years of university = $30,000.
This is about $30,000 I could have paid back.
If I did not take out the maximum loans and also paid back what was left over by living more frugally, my loans could have reduced from $100,000 to $70,000 (not taking into account interest or taxes).
On the flip side, I am happy to say I did not blow all of my money. I did save and start investing, but certainly not as much as I could.
If you find you have any left over cash, be smart with it. Invest or put it towards your loans even if they are paused while in school.
3. I Fell Into Lifestyle Inflation
I write all of this to say, I regret immediately starting my collegiate career with a false-sense of lifestyle inflation.
Because of the maximum loans, I had more money than I ever had in my life. I was also making money by working many, many hours.
I was living a life inauthentic to what I actually could afford. I became accustomed to that lifestyle.
To this day, I am still trying to change this about myself. As I progress in my professional career, I am attempting to prevent lifestyle inflation and live more frugally to make up for the time and debt garnered throughout my years at university.
In Summary…
Of course, hindsight is always 20/20, however in an attempt to prevent future financial mistakes, I cannot help but reflect on the mistakes I made and share my experiences.
Student debt, and the amount that I had, is an extreme weight on my shoulders.
Do what you can to prevent it.
If that means not having the most lavish college experience, trust me, it will be well worth it when you can actually enjoy your finances in your mid-20s instead of worrying about how you are going to make it.
However, I must say, my looming debt drives my motivation and determination to build a life for myself where I will be comfortable enough to not have to worry about money. It drives me to turn my creative passions into profitable side hustles. It drives ideation and innovation.
I will conquer this debt and live a life where I am not shackled to this debt, and I hope you can too. Prevent debt. Mitigate it. Or even inspire you to overcome it.
