By Benjamin Dashley, Ball State University
The other morning I found a $700 check written to me. I didn’t work for it, I didn’t steal it. The check, of course, came from the loan I took out to pay for school.
It’s tuition refund time, when thousands of us find ourselves with the money left over from our student loans after tuition is paid.
So what do you do when 700 bucks suddenly falls out of the sky?
You could save it, sure. Granted, these days you’re probably looking at maybe a tenth of a percent interest on a bank savings account.
If frugality pays that little, why not just spend it? I could buy a much needed fixed-gear wheelset for my bike, or put it toward a new MacBook Pro, also desperately needed.
But it is a school loan after all, and school means books, which some of us budget hundreds of dollars for.
I was smart enough to split costs with a few classmates and found the absolute cheapest deals on Chegg and Amazon. But I still ended up spending more than $100 on books – not including an equal amount for online access to supplemental materials.
So already, that $700 has dwindled to about $500, which is my emergency fund for the semester.
I still really want those new wheels, which I could justify because I’m moving to Chicago after graduation next year. The bike will be my main transportation.
But there’s a better idea. Eventually, that loan has to be paid back. And every day I sit in class, the interest grows, like a fungus on my future.
Even my modest, $10,000 school loan could end up costing close to $15,000 if I only make only the minimum payments and drag it out.
I haven’t had to start paying it back yet, but they’re already sending me updates on how much I owe – and ominously, for how long.
It’s important to understand exactly how your loan works, but it’s not easy. I signed dozens of documents over last summer, and some of the details even baffled my dad, an executive who’s run companies for years.
For instance: Want to start paying back the money early? Be careful – On my loan, once you start the monthly installments you have to stick to a schedule of minimum payments.
For somebody just starting out, that’s a choice I can’t afford.
So there I was, a poor college student with dreams of a better bike, a new computer, maybe a meal not served in a paper sack. We’ve all been there, and at one time or another we’ve all made the wrong choice.
That’s when it’s good to pause, take just one more minute and think it over – while you still have the check in your hand.
I knew what to do with mine: I folded it up.
It fit better in my wallet than in the hands of Apple and everybody else.
Benjamin Dashley is a Ball State University senior and forum and assistant news editor of the Ball State Daily News. He became interested in finance after he was a part of his high school’s Academy of Finance.
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