The saying goes that you’ve got to “look the part in order to get the part”, but some students may be applying that advice a little too prematurely.
According to Student Loan Hero, around half of the university students who participated in a survey on student expenditure disclosed that they spend their school loan money on non-educational expenses.
The student debt management online platform recently published its data, which found that two in five students said that they would use student loans to cover monthly bills, such as rent or phone bills.
Besides that, one in five respondents reported using the funds to cover car costs like a payment or insurance.
Source: Student Loan Hero
What’s even more worrying, though, is the fact that plenty of students are using their loan money for unnecessary expenses: 15 percent said they use their student loans to pay for clothing and accessories, while 13 percent use it to eat out at restaurants.
Some three percent of students also said they use the money to fund their vacations, and another three percent admitted that they used it for alcohol or drugs.
“I think they’re justifying it because of future income,” said Andrew Josuweit, CEO of Student Loan Hero. “They’re thinking, ‘This is the cost of doing business, this is my overhead.’”
Financial advisor Mark Teed told 22News that students who use their loans frivolously will only hurt themselves: “If you take out more than you need, thinking ‘I’ll just use this extra money for some fun stuff’, you’ll end up having bigger monthly payments for the next 10 years.”
The survey involved over 1,000 undergraduates across the U.S.
Meanwhile, the Institute of College Access and Success (TICAS) released a new report on Tuesday, revealing that the average undergraduate student borrower faces US$30,100 in loans after completing their studies.
The figure shows a four percent increase from last year, and likely underestimates the actual amount, as the study excluded students who went to for-profit colleges due to lack of data, even though a large proportion of students at for-profit institutions do take out education loans.
This means that today’s college graduates will have to pay around US$300 per month over 10 years in order to repay their debt, plus interest.
“Overall, there’s been a tremendous increase in the number of graduates with student debt compared to the previous generation,” said TICAS president Lauren Asher.
Over a decade ago, fewer than half of fresh graduates had taken out loans for financial support, but as of 2015, it was 68 percent.
Speaking to USA Today, Betsy Mayotte, director of consumer outreach for higher education financing non-profit American Student Assistance, said that students need to understand that debt can haunt them for years.
“If you live like a lawyer when you’re a student, you’ll live like a student when you’re a lawyer,” she said.
She recommended that students spend prudently during their studies, adding that they can reduce their reliance on financial support by sharing accommodation and finding part-time work.