The Silent Perks of Having Student Loan Debt

The Silent Perks of Having Student Loan Debt

Yeah, you read that headline right. Contrary to what is being said on the news, there are good things about having and paying back student loans.

The average student graduates with around $28,000 these days (as of 2018 and for a bachelor’s degree). I completely agree with conventional thinking that $28k in debt is a ton. Don’t you? And that amount is going to be a burden to those who are just entering the workforce. It definitely was for me.

I had $70,000 in student loans when I first started my career. I paid that amount off in six years….with no handouts from the government (yeah that one’s to you Elizabeth Warren). And I learned a lot by paying those loans off. Things that I wouldn’t have learned if college would have been free.

(Don’t get me wrong. I agree that college is exceedingly expensive and really should be cheaper. But I also simply don’t believe that college is for everyone.)

Here are the top 4 things I learned by paying off student loans.

1. Motivation

You’d be surprised how motivating it is when you realize that you owe more than twice your salary solely in student loans. The feeling is soul crushing. Anytime I thought about how much I owed it felt like I had a boulder sitting on my chest. It literally made it hard to breathe.

I didn’t like that feeling. And I wasn’t in a position to have any loans forgiven, nor can you default on student loans (for good reason). So the only answer was to make more money. I put my career on the fast track.

By working on advancing my career, I ended up tripling my starting salary within six years. I threw extra money each month at each loan like it was my job.

When you know that you are in a good amount of debt for something that cannot be repossessed (an education), then you’ll find you have two choices. One is to accept it, pay the minimum you need to pay for many years.

Or, you can focus on growing your career so you have more income. If you have a higher income, then you can make extra payments to your loans. Pay off the loans faster, pay less in interest.

And when you are debt free, you can bask in the awesomeness of the great career you made for yourself… or quit and do something you think you’d enjoy more.

2. Accountability

Typically, if you take on debt, you have to pay it back. Dollar for dollar, plus interest.

Federal student loans do have a Public Service Loan Forgiveness Program that you could qualify for. But not before making at least 120 “eligible” on-time payments. That’s 10 years. Just saying.

If you borrow money, you need to pay it back. The idea is as simple as that. You don’t get freebies in life.

So let’s say the government decides to partially forgive student loans…

Guess who’s going on a trip to Europe!?! Even I, in all of my ethical glory (a gross exaggeration), wouldn’t turn that down.

As far as I remember, there is no clause in student loan agreements that say the money needs to be used for school. I know kids that took out a good chunk of money and then traveled with it. Or someone I knew bought a car with their student loans because the interest rate was better than a car loan.

And as far as I know, all of these kids are paying those loans back, dollar for dollar, plus interest. But I’m sure they wouldn’t mind if the government decided to forgive/cancel part of their loans.

I mean, who wouldn’t want a government-paid beach vacation?

Student loans are debt. You took them out, you pay them back just like with any other kind of debt.

There is no forgiveness for credit card debt, or auto loans, or mortgage loans. You either pay the money back or you go to collections and lose you car/home. Just like if you don’t pay your bookie, you get your kneecaps broken.

3. A Wariness of Debt in General

Sure there is “good debt” out there. But if you’ve had the experience of struggling to pay back your student loan debt, it’s pretty safe to say that you learned to dislike most debt in general.

It’s not fun to know that you owe someone money. Even if that someone is the government or a bank. And when you finally get out from under that debt cloud, be it a $5,000 loan or a $70,000 loan, you probably aren’t going to grab the nearest credit card you see and max it out.

You’ve learned first hand how interest works and how to manage the effects of debt on your budget. You’ve learned the value of a dollar by having to give so many of them away.

So the next time you’re looking at your neighbor’s new fancy car, just remember that they probably took a loan out on that $30,000+ vehicle. At least your education isn’t going to cost you quarterly oil changes.

(When did cars get so expensive?)

4. The Importance of Prioritizing Your Spending

I would bet that if you are paying on student loans, you are probably living on some kind of budget. Whether you are super strict with multiple spreadsheets (this was me). Or you just check your bank account and make sure you spend less than your balance.

No matter where you are on the budgeting spectrum, you eventually learn to prioritize what you spend money on. If your monthly payment is a decent sized chunk out of your paycheck, you’re going to pay attention to where the rest of your paycheck goes.

If you only have a small amount of your paycheck to spend on having fun, you will be much more selective of how you have fun. For example, if your friends want to go to an expensive concert, you probably aren’t going to go unless you really like the band.

This applies to large purchases too. I still had a good balance left on my loans when I bought my first condo. I didn’t want a condo. I wanted a house.

But I knew how much money I had to pay toward a mortgage and it opened me up to considering a condo. I ended up finding a great deal on a great condo because I knew I had to prioritize my want for a house below my need to have an affordable mortgage.

Invaluable Lessons at a Young Age

The biggest benefit to paying back student loans is that you learn at a young age to pay attention to your money. You take an active role in your finances, which will benefit you throughout your entire life.

I wouldn’t be in the situation I am in today if I didn’t have to pay back tens of thousands of dollars. I look at money in a very different way than many of my friends who didn’t need loans, or who worked their way through college. I’m much more attached to my money (whether that’s a good thing has yet to be seen).

Of course, if you or your kids don’t have to take out student loans, then by all means don’t. Just because you have a full-ride scholarship, or you’re in a position to pay for college in cash doesn’t mean that you won’t learn these four lessons. I just learned them by paying off two degrees.

4 thought on “The Silent Perks of Having Student Loan Debt”

  1. Mecyll Gaspary July 11, 2019 at 4:48 pmEditReply

    I can totally relate to the situation wherein I’m stuck with paying my student loans to finish my university studies. It took me years to figure out how to pay it and learned a lot from the experience. Honestly, I’m still paying them and hopefully in the next few months I can finally free myself from its enslavement. 

    It’s true, most of the students couldn’t realize how student loans push you to be accountable and responsible for financial decisions in the future because of my personal experience. Although it wasn’t pleasant at all, it gave me a sense of achievement in some ways seeing receipts with the amount I paid every month. At least, I made some progress in paying it monthly, though it took me so much time to start paying it. 🙂

    • Katie Post authorJuly 11, 2019 at 6:33 pmEditReply

      Hi Mecyll,

      I love that you used the word enslavement. My husband and I used to refer to my loans in that very way! I completely agree that you get a sense of achievement as you start paying down your balance. I used to be completely obsessed with the spreadsheet I created to track how much I was paying off each month. 

      I’m so excited for you that you are almost done paying everything off! Just a few more payments and you’ll be able to relax. It feels so good when you first realize that you have extra money each month. 

      Good luck and great job!!!

      Katie

  2. Wayne July 11, 2019 at 5:32 pmEditReply

    HI, Katie.

    Prior to reading your post, I never would have thought there could be ANYTHING positive about having to pay back student loans.  However, having read your post, I now see the other side.  

    Some of the things you learned through “Student Debt” I had to learn from credit card debt (my first marriage).  Different but still debt that has to be paid back or (broken knee caps? ouch!) suffer the consequences. The end result is a bad credit rating and it takes a looooong time to gain it back.  My current wife and I pay it off every month.

    BUDGET, BUDGET, BUDGET.  The BEST way to keep out of trouble.  My wife and I have been doing the bank book budget for years.  It’s going to be even more important now that we are retired and have a reduced income.  We have even developed a spreadsheet of our income and expenses.

    I have been married to my amazing wife for almost 24 years. You talk about “Large Purchases” and buying a condo instead of the house you wanted.  We do that all the time, (not with houses) but with cars or trucks to pull a trailer or the trailer itself. We save as much as we can and have been able to pay cash for almost every major purchase we have made in that area.

    It was all her.  You see, she was a Certified General Accountant.  Saved my butt and we are debt free.

    I’m so glad that you were able to learn these lessons at a young age.  So many don’t and in North America, (and other parts of the world), there have been some serious economic consequences as well as personal ones.  They want it all now and many lose everything before they get smart.

    I hope a lot of people read this post.  There are a lot of great tips here.  It’s time people started managing their money better instead of having the “Got to have it now.” attitude.  Governments could learn a few things from this post as well.

    Nothing wrong with being attached to your money, the right way, setting up the right priorities and using it wisely. 

    I wonder if your last statement might bypass some.  Maybe, maybe not.  If they are smart enough to be able to attain a fully paid scholarship through College or University, they should be smart enough to learn the rest.

    To your better success,

    Wayne 

    • Katie Post authorJuly 11, 2019 at 6:46 pmEditReply

      Hi Wayne,

      It’s funny, when I was paying off my loans I didn’t think there was anything positive about them either! It took a few years after being debt free to realize how much they shaped my career and subsequent spending habits.

       I love that you and your wife have developed a spreadsheet for your income and expenses! I am a very big spreadsheet nerd and I know how tracking your money can improve your overall finances. It sounds like you’ve both set yourselves up very well for your retirement. I hope you enjoy every second!

      It means so much to me that you hope many people read about the lessons I’ve learned through paying off those oh-so-fun student loans. Hopefully it will encourage them to keep working toward paying off their debt so they can enjoy a debt-free life and retirement too.

      I wish you all the best!

      Katie

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