If you’re like most college graduates then you probably finished school with student loan debt. It has been estimated that the average grad now walks away owing around $25,000 while the total value of outstanding student debt in the United States has recently topped $1 trillion. There are a lot of people out there talking about what this means. Some are saying it’s the next economic bubble set to burst, while others believe that if grads would just get their heads on straight and get jobs then we wouldn’t be in this mess.
I’m not here to talk about all of that. Most people are already tired of the negative talk about student loans. I think it would be fun to turn the whole issue on its head and reveal some of the life lessons I’ve learned from my experiences with debt.
1. Your Credit Report is a Measure of Your Responsibility
There have been stories floating around the internet about employers checking the credit reports of potential new hires and using this information in their decision making. Credit scores and reports are also used to determine if you are eligible for any sort of loan (auto, mortgage, etc.). If you have a sketchy report or a low score then the chances of getting that job or the money for your new motorcycle are seriously limited.
What loan officers and hiring agents are looking for is how responsible you are. Do you meet your financial obligations? Do you pay on time, every time? Sure, this is just one measure of responsibility, but someone who is irresponsible with money is probably generally irresponsible overall. Like it or not, you will be judged by your credit.
Recently my fiancé and I began the process of purchasing a house. One of the first things the bank did was check our credit scores and histories. My score was close to 800 simply because of my student loans. I have no other debt, but I diligently pay my loan bill on time month after month. This certainly helped us qualify for the mortgage.
2. If You Don’t Ask For It (or work for it), You Won’t Get It
My monthly payments after I graduated were quite high. I struggled to make the payments for about six months before I finally decided to restructure my plan. I consolidated my loans and got myself on an income-based repayment plan. Making the monthly payments is now much easier and I am much more comfortable with my financial situation.
What I realized is that if I hadn’t asked for this restructured plan then I never would have gotten it. Sallie Mae didn’t care that I was having a tough time… they would have simply sent me to collections. I had to ask for what I wanted, and then I had to do a little work and jump through hoops to get it.
Similarly, a new position opened up in my company not too long ago, and I was certain it would be offered to me. I was pretty disappointed a few weeks later when a co-worker got the job and I didn’t. Later I asked my boss what made him choose the other guy and he said that the other guy directly asked for it and that he didn’t realize that I had even wanted the position. The other guy asked for it, and he got it.
3. Setting Goals Works
Dreaming about what I wanted got me nowhere; I didn’t know what steps to take to reach my dream of affordable payments. A goal, on the other hand, is achievable. Instead of sitting around and waiting for that position to be offered to me I should have made it my goal to get it.
Setting a goal is the only way to make a positive change. Dreaming about what you want your life to be like requires no action. It’s simply a dream. Having a dream is like having a vacation destination, but no car or roadmap.
Setting a goal gives you a target. It’s having a destination, but also knowing exactly how to get there. It’s going to take some work, and you might make a few wrong turns, but if you keep going and keep taking those steps then goals are things to be achieved and not just dreamed about.
Many people dream of being debt free. I certainly did. Unfortunately, when I was only dreaming about it I wasn’t doing anything to get myself there. Now I have a goal being debt free by 40 (student loans, mortgage, car… everything), and I’m working on it. Every day I take another step toward financial freedom. Having that goal motivates me to work in a way that dreaming about it doesn’t.
We all know about the financial hardship recent grads are facing, and we know about the debates in Congress over student loan interest rates. We all have our own opinions on what these things mean and what should be done about them, but, unfortunately, there’s not much talk going on about the positive aspects of student loans. Certainly it is a broken system that needs to be fixed, but that shouldn’t prevent us from learning from our experiences. Only when we gain some perspective on the situation will we truly know how to move forward.
The Dr. Cabler Take on Things
As you know if you’ve kept up with CFF for long, I advocate staying away from debt. It doesn’t have to be a part of life and only serves to keep you in bondage. With that said, I want to address some of the things Kyle talked about in his post (He agreed to let me do this).
Your Credit Report is a Measure of Your Responsibility
I guess I can agree with that to an extent. Your credit score is a measure of how well you use credit. However, in my mind, a credit score of zero because you don’t have any debt really is the best score of all. You can still buy a house or a car without a credit score. You can still get a job without one too, you just have to make sure and tell your prospective employer that you have no debt, thus no credit score. There is nothing magic about a credit score that allows you to participate in commerce any better than you can without debt.
If You Don’t Ask For It (or work for it), You Won’t Get It
He’s right, you have to be proactive in everything you do. If you want the job, the date with the cute girl, or the raise, the best way to get it is to ask for it. It can be very surprising the advantages you can get in life just by asking, and what you can miss out on by not asking. You may not always get what you ask for, but if you don’t ask you’ll never get it, period.
Setting Goals Works
Right again. Setting goals does work, and it’s the best way to get you to where you want to go in life. You can’t just let life happen to you.You have to happen to your life. I believe if Kyle continues to be proactive and works hard on his goal of being debt free by 40, he can achieve that. Dreaming is a great first step, but you have to pair that with a plan and put action behind that plan.
In my opinion, there are not really any positive aspects to having student loans. Some people might argue that they allow you to get an education and make more money in the long run. But with good planning beforehand (Here’s a great resource), you can go to college debt free by working your way through college, among other things, and staying away from debt at all costs. It CAN be done.
Article originally published on Celebrating Financial Freedom. Used with permission.
Dr. Jason Cabler is a Christian personal finance blogger, author, and speaker. He teaches how to get out of debt and live a debt free lifestyle through his Celebrating Financial Freedom blog and self study course. His new book How to Budget- The Quick and Easy Guide to Making a Budget That Works is now available. He can be reached for interviews or speaking engagements by email (email@example.com) and can be found on Twitter and Facebook.
Publication date: October 31, 2012