Case Studies: Learning How To Manage or Completely Avoid Student and Personal Loans – Part 1
Case Studies: Learning How To Manage or Completely Avoid Student and Personal Loans
For many people, college costs tend to be some of the most significant ones in their lives. Because of that, families tend to have lengthy conversations trying to figure out how to split up college costs and what kinds of financial aids should they acquire. Sadly, there are few the families that can afford college education with their own savings, which is why in most cases they have to rely on personal loans or student loans to do so.
However, with the financial crisis of a few years ago still looming over the job market and with basic living costs becoming increasingly expensive, acquiring a personal loan or a student loan is the last thing anyone needs.
So, in order to help you or anyone facing the need to acquire a personal loan or a student loan to manage it or to avoid acquiring it altogether, here we will consider two very particular cases of families that faced this and how they put everything under control.
Case Study No. 1
For Barbara’s parents, their ideal situation would have been to give their kids a good start in life with their education. However, being forced to acquire a relatively large personal loan definitely stopped their dream on its tracks. However, they didn’t let this discourage them, and instead they implemented a series of steps to regain control of their finances and to not affect their children.
– 1. Be Upfront With Your Kids When it Comes to Debt: Debt is something that all your kids should know about. There is nothing wrong with it and, if taught correctly, can even show your kids how to be financially responsible. If you fail to do so, your kids will be at a great disadvantage understanding what a student loan debt or a personal loan is when they are already down the road with their studies. So it would be ideal for them to have the notion of debt and of a personal loan that needs to be repaid, since most likely that personal loan will be the first debt they will owe.
– 2. Order Your Expenses by Priority: When it come to spending funds from a personal loan or a student loan at college, most of your kids expenses will fall into one of two large categories: Education and experiences. Educational expenses are the ones tied straight to college education and usually include very tangible concepts like tuition, books and such. On the other hand, experience-related expenses are also commonly known as “extras” and can be: living on campus, traveling abroad to study, becoming a member of a fraternity and such. On paper, these might not seem necessary, but they indeed bring a series of valuable experiences and can help kids forge important contacts.
The key question to ask in the case of college experiences is: Will my son/daughter will gain something really valuable from this?
Of course, if your funds are limited and you can prevent acquiring a personal loan by restricting these expenses, then it might be worth it.
– 3. Every Little Dollar Counts: One of the most common mistakes that parents tend to make when thinking a about paying for college is to be discouraged by how high the amount of the personal loan can be. However, Barbara’s parent knew better than to be discouraged by that and started to save small amounts a couple of years before their daughter attended college. Thanks to this, by the time she had to, the amount of the personal loan they had to acquire was actually a few thousand of dollars less.
That ends our first case study of a family that, while couldn’t avoid acquiring a personal loan, actually managed to soften the impact of it by being up front about it and by choosing (wisely) to save.
Stay tuned for the second (and last) case study in this series, you might learn a few things about how to better manage student loans and personal loans.