University of Phoenix

The Do's & Don'ts of Paying for College.

When a person doesn't borrow responsibly, it could lead to a number of things including a higher debt being paid back due to interest that has accrued.  It could also mean wreaking havoc on your credit, making it difficult to purchase a home, car or other major asset.  Irresponsible borrowing means that no other lender will loan you money, and if they do, the interest rate will be exceedingly high.  Other consequences of irresponsible borrowing are:  wage garnishment, tax intercept by the IRS, repossession of vehicles or homes, and possibly being sued by the lender.  

If for any reason you are unable to pay a loan on time as promised, then you contact the lender and make arrangements to extend the contract, discuss other payment options, or just don't borrow more than you can afford.  When considering a loan, take into account your household expenses, incidentals and other factors to help determine how much you may be able to borrow.  Remember, the loan amount accrues interest on an ongoing basis and that will make the debt even higher.  A smart borrower thinks before making monetary decisions that may affect their future earnings; an irresponsible borrower dives in head first without thinking of how they’re going to be able to pay back the loan plus interest payments. 

Good R. The Do’s & Don’t s of Paying for College. Black Enterprise [serial online]. February 2011; 41 (7): 32. Available from: Academic Search Complete, Ipswich, MA. Accessed May 2, 2012

Borrower Beware

The loan proceeds aren't taxable, but, of course, you do have to repay the loan with interest (which, by the way, is not tax deductible). And while the interest does go into your 401(k) account, it's possible that the interest rate you're paying may be less than what those funds would have earned if they'd remain invested in the plan, in which case your 401(k) balance at retirement will be lower than it otherwise would have been. Another...