Many use student loans to finance spring flings
When people hear the term “student loans,” they typically think of tuition bills, pricey textbooks and other campus-related expenses.
However, a new survey indicates that nearly a third of college students use some of their loan money to finance spring break trips.
LendEDU, an internet site that tracks student loan and education policy news, released survey results showing that about 30 percent of U.S. students plan to tap into their college debt to pay for spring break-related trips.
A similar study conducted in 2016 by Google Consumer Surveys on behalf of Student Loan Hero found that nearly 20 percent of students spent some of their loans on entertainment and spring break activities.
Robert Dunn, community outreach manager at Consumer Credit Counseling Service of Buffalo, told WBFO such practices only add to debt burdens that can be problematic in the future.
“A lot of students going to college [don’t know] what to expect when they get out -- how much they’re actually going to have to pay,” Dunn said. “And for a lot of them, it’s kind of a shock when they find out they are going to have to pay $250 per month for their student loans, which could be a car payment.”
Still, Dunn noted that there’s a likely financial reason many people use student loans to help finance trips and other entertainment-related expenses. He said interest rates on student loans are typically much lower than debt that is racked up on credit cards. Many student loans carry interest rates in the 4% to 6% range.
“With credit cards, you could have 25 percent interest,” Dunn said. “So maybe that’s some of the rationale by students using student loans to pay for trips.”
But he cautioned that even with the lower interest rates, racking up debt can cause painful long-term fallout.
“I mean, it’s only increasing the burden of student loans,” he said.
According to Student Loan Hero, Americans owe more than $1.3 trillion in student loan debt, spread out among about 44 million borrowers. Students who graduated last year had just over $37,000 in student loan debt, up 6 percent from 2015.
Consumer Credit Counseling Service of Buffalo helps hundreds of current and graduated students manage their college debt each year, said Dunn.
“I think it’s going to continue to be in demand, especially if -- according to the survey -- we are using student loan funds to pay for trips. Sounds like we got a long way to go before we fully understand student loans, the interest rates, and the burden it can put on you in the future.”