What should you do if you have student loans?
Pay them off.
Seth Godin wrote about this a while ago. I think he was talking about all debt (maybe except house debt), but I can’t find the post. You can still find his blog at http://sethgodin.typepad.com and I recommend it as daily reading, just because he’s good.
I’ve been seeing a lot about student loan forgiveness lately, and felt the need to rant a little. Here’s the deal, we keep student loans around because they’re expected, intimidating, unnoticed, accepted, or whatever other reasons. Maybe it’s time to start looking at this a different way.
If you have debt, let’s say $20k, every purchase you make is a decision to stay in debt or to get out of debt. So, when you make a purchase, ask yourself “is this something I really need and am willing to go into debt for.” Because, that is essentially what you’re doing. If you make a decision whether or not to go to Starbucks, you’re making a decision to put $4 towards your loan, or towards coffee. If you choose coffee instead, that’s $4 not going towards paying off a loan, and essentially $4 more dollars of debt. You’re choosing to charge, and pay interest, on a cup of coffee.
Okay, so that’s not a lot of money, but it adds up. Today, it’s $4 in coffee. Tomorrow it’s McDonalds for the family, and that’s $20. Friday is payday, so you go out to lunch at work, and it’s $7. Now that’s $31 in a week. In a month, that’s over $100. And, you’re deciding to put that towards crap rather than towards your loan. The value of all that is gone already, and you’ve financed it. Yes, you’ve literally financed dinner.
Work hard, be aggressive, and cut your spending to next to nothing. Do something to earn extra income. Put all your effort into getting out of debt. In essence, your money is leaking out of your pocket and you need to stop it. The government isn’t going to do it (and shouldn’t). Pretend you have almost no income. Work for extra and still pretend. Stop the bleeding, and you’ll be amazed at the relief.
Edit: I found the blog I was referring to by Seth Godin. You can see it here: http://sethgodin.typepad.com/seths_blog/2008/06/urgent-personal.html
