I’m about to finish high school and honestly don’t know much about finances. I’m trying to learn before I head off to college next year. Everyone keeps saying to avoid going into debt for education, but I’m not sure what that actually means. What happens if you have too much debt? Also, how do student loans and tuition payments actually work? Any advice would be awesome.
Debt can be a big deal because of interest. When you borrow money, you’re paying back more than what you borrowed. For example, borrowing $10,000 could mean paying back $14,000, depending on the interest rate. That extra $4,000 is profit for the lender. It can also trap you in a cycle where the interest keeps growing and your debt keeps increasing.
@Phoenix
This is so true. High-interest rates on loans, like credit cards, can add up quickly. Someone I know had a car loan with a 25% interest rate, and it was rough.
Chance said:
@Phoenix
This is so true. High-interest rates on loans, like credit cards, can add up quickly. Someone I know had a car loan with a 25% interest rate, and it was rough.
Yeah, interest piles up fast. I didn’t realize how bad it could get until I learned that investments only give about 7-10% returns, but some loans charge way more than that. It’s crazy.
Chance said:
@Phoenix
This is so true. High-interest rates on loans, like credit cards, can add up quickly. Someone I know had a car loan with a 25% interest rate, and it was rough.
Exactly. It’s why debt ends up costing way more than people realize at first. It’s always a win for the lender.
@Phoenix
I found out about minimum payments the hard way. I had a furniture bill and realized it would take 7 years to pay off instead of 4 because of the way interest works.
Cai said:
@Phoenix
I found out about minimum payments the hard way. I had a furniture bill and realized it would take 7 years to pay off instead of 4 because of the way interest works.
Yeah, minimum payments are tricky. It’s not about helping you pay off the debt; it’s about keeping you as a paying customer for the lender.
@Phoenix
I feel this. My student loans keep piling up even though I’m making payments. It’s like I can’t catch up.
Debt takes a chunk out of your cash flow. I didn’t fully understand how much it affected me until I was older.
Mars said:
Debt takes a chunk out of your cash flow. I didn’t fully understand how much it affected me until I was older.
It’s so freeing when you stop paying interest and start saving that money instead. It makes a huge difference.
@Val
Totally agree. I paid off all my debt in a year, and now I have so much more money to save and invest.
Mars said:
Debt takes a chunk out of your cash flow. I didn’t fully understand how much it affected me until I was older.
If ‘cash flow’ is confusing, think of it as the money you have left after paying all your bills. Debt reduces that.
A good rule is to keep student debt under your first-year salary. For example, if you expect to earn $50k a year, try to borrow no more than $50k.
Oak said:
A good rule is to keep student debt under your first-year salary. For example, if you expect to earn $50k a year, try to borrow no more than $50k.
I’d even suggest less than that. Debt can feel manageable until you start making payments. Always aim for the lowest amount possible.
Education debt can be okay, but it depends on how much you borrow and what your expected salary will be. Spending $150k on a degree for a $30k job isn’t worth it.
Pax said:
Education debt can be okay, but it depends on how much you borrow and what your expected salary will be. Spending $150k on a degree for a $30k job isn’t worth it.
Debt is only good if it leads to returns. If you’re stuck paying it forever, it’s not worth it.
If you can avoid debt, do it. I had a lot of credit card and car debt in my early 20s and spent years paying it off. It was miserable.