Now, we all know that college is getting more and more expensive. You can expect to pay as much as $50,000 per year at the more prestigious universities around the country. For a simple bachelor’s degree, that adds up to $200,000. While most folks are able to get some form of financial aid, the fact of the matter is that you’ll probably have to pay for most of your education with student loans and maybe even with personal loans, as well.
Those loans are going to add up over time, but you might not realize exactly how much they’ll add up. Once you graduate from college, interest starts accruing right away. If you’re not diligent about paying your student loan payments or if you go through a rough patch where you can’t afford to make those payments, your debt can get out of control.
Take, for example, Michelle Bisutti. She went to medical school and finished up in 2003. She had debt that outpaced many other students, as medical school adds quite a bit in terms of expense. When she graduated, she had a hefty $250,000 in debt.
Today, however, she owes $555,000 on her student loans.
Yes, that’s right. It cost one doctor half a million dollars to go to school.
How did this happen? Well, during her residency, Bisutti deferred her student loan payments. During that time, the interest was capitalized on loans that weren’t subsidized. (Subsidized school loans are ones in which the government will pay your interest under certain conditions.)
Add to that a fee of more than $50,000 when her loans had to be turned over to a collection agency, and today she owes more than twice what she did just seven years ago.
What’s especially frustrating is that student loans can be hard to get out from under. If you owe too much on a home you can’t afford, you can default. If you have credit card debts that you can’t pay, you can (in a worst case scenario) file bankruptcy.
But, with student loans, you can’t get rid of them. Lenders are usually willing to work with borrowers to make payments manageable or to trim interest or fees, but it’s not likely that you’re going to see a reduction of principal.
While Bisutti’s situation may be extreme, it’s becoming more and more common. The bottom line is that you need to be careful when taking out student loans, and make sure you’re paying them back on schedule.