College Students Using Loan Money For Non-Educational Needs and Desires
Nearly half of all college students will spend their loan money on items not pertaining to college life. According to a Student Loan Hero survey, three percent of college students have spent their money on drugs and alcohol. 41 percent spent the money on their monthly bills – such as cell phone or the Internet, 19 percent paid for their car payments or insurance, 15 percent purchased clothes, 13 percent went out to eat, and three percent used the money for a vacation.
Student Loan Hero CEO Andrew Josuwelt said students are justifying their spending based on their future income. He said students are thinking that when they graduate from college, they’ll get a high-paying job and paying their loan payments will be a drop in the bucket.
However, the money adds up, as does the interest. Betsy Mayotte, American Student Assistance director of consumer outreach, said the average 2016 college graduate will have about $37,000 in debt. Students must understand that this debt will follow them for years. She said living like they’re a lawyer while a student means they’ll live like a student when they are actually a lawyer.
Mayotte said students need to think of their total debt in monthly payments, which would give them a better idea of what the whole amount would be. And, with the help of free financial resources such as College Navigator, they can see how much debt the average graduate would carry.
Mayotte said roughly 80 percent of students will switch majors, which ends up costing them, even more, money. She said it’s best to declare a major and looking at the courses before making a commitment. She said by waiting, there won’t be a need to repeat credits and add to the debt.