Spending money to decrease debt

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April 9, 2012

11:30 PM

As an out-of-state student here at the College of William and Mary, I often conveniently forget that I am paying nearly three times more than in-state students to attend this school. I choose to view this situation as one that is fortunate for in-state students, who should consider themselves lucky to have a multitude of elite state institutions they can attend. In any case, I shall not subject you to a ranting essay about the tuition differences.

The only reason I bring up tuition costs is because of my choice to attend a school with a relatively high tuition. Throughout the college decision process, my parents were always in favor of me going to the academic institution where I felt most comfortable, regardless of the cost. Their only stipulation, regardless of where I eventually chose to go, was that I would be responsible for half of the tuition and room-and-board costs. In the end, I chose the College because of its size, its liberal arts program and the reputations of its professors — and I must say, I have not been disappointed.

The reality of my choice, however, usually hits home when I begin the search for student loans. This process reminds me of the impact of accruing interest and how student debt piles up extremely quickly. The cost of tuition is skyrocketing across the country, which is further complicated by the dwindling financial support from both the state and federal governments.

Not to sound all doom and gloom, but the reality is that increasing debt is accompanied by the still-difficult job market many undergraduates face when beginning their search for employment, and this often delays or inhibits their ability to obtain an income. At the same time, many loan payments automatically begin six months after graduation and place a burden on those graduates still looking for meaningful employment. This particular issue is of such importance in light of recent debates in the federal government involving relief for students straddled with debt, whether that comes in the form of delayed payments or reduced principal balances.

The private sector has also taken note of this predicament in which many students find themselves. In fact, the SmarterBank Visa debit card was recently launched for those who are concerned with their level of debt. The card offers graduates a reward of up to 1 percent on purchases, which is used to offset their student loan principal balances. While on the surface this may seem beneficial to students, upon closer examination, the offer seems frivolous and even detrimental to a student’s ability to pay off debt.

First of all, the card agreement states that only 0.5 percent rewards are obtained for the first $100 spent, with 1 percent for any amount over $100. Secondly, the cardholder can be slapped with fees for out-of-network ATM usage, paper statements or “research fees” for the company to look into information regarding the customer’s account. Beyond the contract, the idea of spending more money in order to save on debt is completely contradictory. In the end, the old adage “caveat emptor”­— let the buyer beware — still holds true in relation to this SmarterBank card.

Instead of relying on any sort of reward program, the best method to seriously diminish one’s level of student debt is to seek meaningful employment. At the end of the day, taking the time to create a budget, which includes a portion of income that is automatically dedicated to paying off debt, is the most effective method to becoming debt free. This method requires a certain level of discipline, but in the long run, it will save you thousands in deferred interest payments. Until the government shows any signs of providing assistance to students strapped with debt, each and every one of us faced with student loans will have to implement our own personal austerity measures to begin to erode the ever-growing mountain of student debt.

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  • Derek Bluemling