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9.1 Responsible Borrowing

Thus, upon graduation you have $12,155 in outstanding student loans that you must repay.
This interest accumulation is one of the big reasons subsidized loans are more appealing than
unsubsidized ones.

There are certain perks to some of the government subsidized loan programs, however. Under
certain circumstances you might be eligible for one of the federal government’s loan forgive-
ness programs (http://www.finaid.org/loans/forgiveness.phtml). For instance, if you work
as an AmeriCorps volunteer, you not only receive a stipend, but get money to put toward your
student loan balance (http://www.nationalservice.gov/programs/americorps).

For many students, signing loan papers and having money magically appear in an account is
a powerful seduction. With a simple signature, you can have access to a lot of money through
your student loan. You could use that money to have a nicer apartment, eat out more, and
maybe afford a car. None of these, however, pertain to your education.

How to Use and Pay for Your Student Loan

How, then, should you spend your student loan money? The answer is: on tuition, books, and
supplies (e.g., a computer and lab equipment) that you need for your classes. These are edu-
cation expenses. The burden of student loans can have a negative impact on your relation-
ships, how you feel about yourself, and your future standard of living. To minimize this strain,
only ask for as much money as you really need and make sure you spend your student loan
money only on your education expenses!

Consider Isabel, a friend of Elena
Maria’s who entered college right out
of high school. She financed her educa-
tion and living expenses with student
loans. When she graduated she had
$50,000 in student loan debt. Isabel
was not careful with her money. She
chose not to work while she was in
school, so she borrowed not only to
finance her education, but her lifestyle
as well. She had a nice apartment with
no roommates to help cover costs. Isa-
bel continued to buy her shoes and
Wavebreakmedia Ltd/Wavebreak Media/Thinkstock
clothing at expensive stores. After
One way to lessen the burden of student loans is to
attending classes and doing home-
ask for only the amount of money you really need
work, Isabel was tired, so she dined out
for books, tuition, and supplies.
with her friends at her favorite (and
expensive) restaurants. In her mind,
Isabel thought she had earned these perks. She worked hard, went to class, and received good
grades, and she justified these extras as validation for a job well done. But this lifestyle, which
was paid for with student loans, has now come back to haunt her.

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