When you are in school, your main focus is, and should be, your class work. However, because you are not employed full time, most students must use student loans as a way to fund both school and living expenses. At the time the loans are incurred, it is easy to minimize the effect that repayment will have on your lifestyle down the road. However, it is crucial for the financially aware student to recognize what they SHOULD and SHOULD NOT spend student loan money on.
Because student debt carries substantial principal and interest payments, the funds received should be used wisely. Using loan money for school is an investment in your future and can be considered “good debt;” your education will serve you the rest of your life. Using loan money for the latest designer clothes is fleeting. A simple way to determine how you should spend student loan money is to decipher between WANTS and NEEDS. If you use most (if not all) of your loan money on your NEEDS, then the debt repayment after school will be a LITTLE more bearable. Now, the brain is a funny thing, and it may try to convince you that the most expensive new laptop or daily trips to get takeout for dinner are NEEDS. Try to resist!
Here are some things that you SHOULD spend your student loan money on:
1) Standard groceries;
2) Rent in a reasonable apartment that is comfortable, but not over the top;
3) Furniture, taking hand me downs when possible;
4) Books/school supplies; and
5) Transportation expenses to/from school.
Things that you should NOT use loan money on:
1) Takeout every night of the week;
2) Your wedding;
3) A brand new car;
5) Bar tabs;
6) Expensive computers; and
7) Everything else: if you do not need something to survive and will not remember it in 5 years, it is not worth the borrowed money you spend on it.
If you have to convince yourself that something is a need rather than a want, chances are it is a want and should not be bought with borrowed funds. Your education is the reason you incur student loans in the first place and should be the focus of their use.
~Megan Hille, Esq., Pesavento & Pesavento
Do you ever wrestle with how to spend and not spend your loan money? Tell us how you stay on track in the comments below!