The Effects of Smart Vs. Unwise Borrowing Habits

STUDENT LOANS Borrow Smart! The Effects of Smart Vs. Unwise Borrowing Habits Borrowing money is almost always easier than paying it back! By taking a look at the financial decisions of two college students, you can see how simple life choices can make a big impact on your total student loan debt and your future repayment bills. Meet Will & Ally William Wise & Ally Oops are 2 independent college students, attending the same school, in the same field of study, at the same academic level. Although they were eligible for the same amount of aid & both attended the same 4 year program, they made very different choices throughout their educational experience. VS. William Wise Ally Oops Will searched for all possible Ally assumed she wouldn't be eligible for scholarships, ways to pay for school before accepting student loans. SEARCH FOR AID & grants, or aid. SCHOLARSHIPS Will worked part-time while in school to help cover living expenses and entertainment Ally didn't consider working at all, while in school, and instead rang up high credit card bills on things she didn't really need. costs. Will lived in an apartment Ally lived in a 2 bedroom townhouse by herself. with roommates in order to limit rent costs. Ally leased a car and drove everywhere she went. Will caught the bus to school and rode his bike to work. STOP Will learned to cook, 11 Ally took herself out to lunch everyday and often ordered take out at night. impressing his friends and saving money on food costs by buying groceries. During school, Ally didn't pay any of the interest that was accruing on her unsubsidized loans, resulting in higher During school, Will mailed in a payment every month for all of the interest that was accruing on his unsubsidized loans, saving him money down the road. repayments down the road. Because of his 'smart Because of her 'unwise borrowing' choices, Will was able to borrow only the amount of loans that were absolutely borrowing' choices, Ally borrowed the full amount of necessary to pay for his education! loans that were offered, regardless of the amount she actually needed. William Wise Ally Oops Total Amount of Student Loans Borrowed (Over 4 Years): $16,000 $42,000 Monthly Student Loan Payment: $184/mth* $483/mth* As you can see, the little choices you make can add up in a BIG way when it's time to repay your student loans... Borrow smart! Conclusion Both monthly payment amounts were calculated based upon a 10-year standard payment plan with an interest rate of 6.8%. William's monthly payment amount was calculated based on him receiving $16,000 in subsidized Direct Loans over a 4-year period. Ally's monthly payment amount was calculated based on her receiving $19,000 in subsidized Direct Loans and $23,000 in unsubsidized Direct Loans over a 4-year period. If Ally did not pay all of the accruing interest on her unsubsidized loans, while in school (as our example suggests), her monthly payment amount would be even higher. YGrad