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3 Things I Wish I Knew Before Taking Out Student Loans

College Planning Credit.com

Student loans can be a necessity. They can also be a way out of a more difficult semester or year. In my case, I thought I needed a loan, but in hindsight I see that I didn’t.

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In personal finance my eternal truth is this: If you can’t afford it, you can’t afford it. I borrowed $5,000 from the government during my freshman year of college. I had no scholarships and only about $1,000 saved from my summer job. My parents generously helped me throughout college because they planned ahead and saved a fixed amount for me. I took out a $5,000 federal Direct subsidized Stafford loan in 2010 to attend school. But it was more than enough to cover tuition that year, and I used the remainder to pay for my dues and activities as a member of a Panhellenic sorority. The T-shirts and events add up!

1. I wish I’d known that a sorority wasn’t necessary.

I now realize that if I had to use borrowed money to pay for it, I couldn’t afford it. I wish I had used the loan for tuition only and spread it into the next school year. I’m now paying interest on T-shirts that I don’t even have anymore.

2. I wish I’d known how much taking out a loan really costs.

My $5,000 was taken out in 2010 with an interest rate of 6.8%. The lender put me on a 10-year timeline with monthly payments of $80.39, but I’ve been making payments of $250 and plan to increase it as I earn more so I can pay it off in two years, and pay less in interest charges overall.

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3. I wish I’d known how to reduce my interest.

You can work really hard in the summer to avoid loans, reduce the amount you need, or pay off the principal and/or interest that has already gathered. I wish I had portioned part of my summer earnings to pay down my loans while I was in school so that I’d be that much more ahead when I graduated.

I am glad that my student loans are relatively smaller in comparison to many of my peers. I am astounded by the stories I hear of $40,000+ in student loans. I earned generous scholarships during my other three years in school and was able to avoid digging myself further into debt.

Avoid loans as much as you can. Take the smallest loan possible. Whenever possible, borrow from the government because they usually offer better interest rates. Pay it off as soon as possible to avoid paying back much more than what you borrowed! As you pay down your loans, take comfort in the fact that you are building a positive credit history, which will help you in the long run because a good credit score gets you access to cheaper interest rates, meaning you pay less on debt over time. You can see two of your credit scores for free on Credit.com to see where you stand, and how your student loans are affecting your credit. And if you’re having trouble making your monthly payments, reach out to your loan servicer to see what alternative payment programs you’re eligible for.

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A recent graduate of Georgia College in Milledgeville, Maggie Perkins is a newlywed living on a small scale farm in Lilburn, GA. She's working towards balancing student loan payments and new household expenses all while keeping up with work, "pre-marriage" friends and our ever changing lives. Her desire to complete the Tough Mudder conflicts with her love of Nutella and watching House of Cards on Netflix.