Student Loan Corporation: Bad for College Students
Quite often representatives from Student Loan Corporation will come around and visit college campuses and give seminars. They offer free lunch to students and give seminars on budgeting, financial aid, and other money topics. When I heard news that one would becoming to my college campus, I decided to go just to see what kind of information they were pitching to college students. I went and enjoyed the free lunch, but that’s about the only part of the presentation that I enjoyed. They gave out several pieces of bad information that college students should not follow.
Their first mistake was telling students to save part of their loan money and put it into a savings account. Their logic was that doing this will help you build your savings! Here’s the problem. With student loans usually you pay a 2% origination fee, on top of the interest of the student loan. If you don’t use all of your student loan money, you should just return it. That way you are not borrowing quick online money to put into a savings account. It doesn’t make sense regardless of how you put it. If you have money available to you, there’s a good chance you’ll just end up spending it!
The second major mistake was that they told us to make use of online savings accounts. The woman actually got the name of the bank wrong, she referred to it has HCBC rather than HSBC. She told us to take that extra student loan money and put it into a high yield savings account, so that we would make some money. This was a very bad piece of advice. The woman in question was telling us to borrow money on our student loans at 6.8%, and then go put it into a savings account at about 5%. Even the top savings account is about 5.5%, and that’s for extremely high balances. This is financially dangerous to do. You would be losing money at the end of each year when all is said and done.
After those bad pieces of advice, they talked about basic budgeting techniques, which did a good job showing students how the mechanical techniques of budgeting work, but there’s so much more to it than that. Budgeting is all about modifying your personal behavior, not just the head knowledge. You have to be disciplined to do a budget. That’s what matters.
If you hear that a student loan corporation representative is coming to your college or university, be wary. Suggest to the university dean that a business professor review the presentation before it is allowed to give to students. If they will not, warn all of your friends about it an advance and write to the college newspaper to let them know what’s going on.