Page 196 - digitalliteracy

9.1 Responsible Borrowing

Here we see the attraction of the lower loan payment. She saves $100 a month by financing the
loan over 20 years instead of 10. However, this is where self-deception can worm its way into
your thinking. Although she pays $100 less per month, in the long run she pays more than twice
as much interest ($6,800 versus $14,600) because she takes twice as long to repay the debt. The
general rule of thumb is that you never shop by payment amount. Anyone can make your pay-
ment affordable by simply extending your payments over more months. Financing over a longer
period of time, as we saw in Table 9.4, only increases your costs. Try out the following student
loan calculator by plugging in different numbers to see how your loan would be affected: http://
www.bankrate.com/calculators/college-planning/loan-calculator.aspx?MSA=&MSA=.

Consider more tips in Strategies for Success: Five Rules to Follow When You Take Out Student
Loans.

Strategies for Success:
Five Rules to Follow When You Take Out Student Loans

1. Don’t take on more debt than you absolutely need.
2. Avoid using student loans to pay for a lifestyle you cannot afford.
3. Use lower interest federal loans instead of higher interest private ones.
4. Remember to check into federal loan forgiveness programs.
5. Repay your student loans as quickly as you can.

Reflection Questions

1. For what types of expenses should student loans be used?
2. Why shouldn’t you use your student loan to buy a new car?
3. Suppose Manny just graduated with a bachelor’s degree in education but also with
$20,000 in student debt. What loan forgiveness programs might help Manny lower
his debt?

180
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.

sol82612_09_m09_171-194.indd 180 6/29/16 5:19 PM