The biggest mistake low-income students make when it comes to student loan debt

The biggest mistake low-income students make when it comes to student loan debt, in my opinion, isn't what you might think. 

Sure, taking out too many loans for a private school may not always be the best decision if you can get a similar degree at a public institution for much cheaper (though some private schools may surprise you with how much financial aid they'll offer if you're a great student).

And getting too many loans and dropping out of college before getting the degree that can help open up opportunities which would help you pay back those loans is definitely not good. 

However, the biggest mistake I see students making, especially those who come from low-income backgrounds (like I did), is something different:

It's the misunderstanding of the difference between "debt" and "investment."

Rich people invest. Poor people go into debt. 

If you grew up in a low-income family like I did, in college you may find yourself feeling so burdened from having seen the debt your parents had to endure that you think the number one way to stop being poor is to not get into debt. 

But this can backfire.

To be sure - you shouldn't go racking up credit cards on the fanciest clothes, cars, homes, and things you can't afford. That is still classic debt. 

But your college education is one of the best investments you can make, as long as you are willing to invest the time necessary to do it well and get the degree.

I remember being really afraid of a $1,500 loan I was offered my second year of community college. Loans? Debt?! Yikes!! No no no. Debt is bad, bad, bad. I'm definitely not going to take this loan and instead I'll work more hours - yes!!

But here is what a wise mentor told me: 

Your education is the best investment you can make (especially at a reputable, accredited, public school). If that loan can help you work less, get involved more, and increase your performance in school then it is a WISE investment. 

I decided to take that loan. It allowed me to work a little less and get involved (and study) a little more.

I became president of our Phi Theta Kappa chapter that year and won the $110,000 Jack Kent Cooke scholarship.

See the difference? It was an investment, because it gave me the opportunity earn more money and be more successful in the long run. 

Let me say that again: An investment is something that can make you even more money in the future. 

Debt is something that sinks you deeper into a hole in which the thing that got you into debt CANNOT get you out.

The newest phone, the luxury car, the designer clothes - those things alone don't have power to get you out of debt.

But a college degree, well, even recent reports still show it is the kind of thing that can help you make more money. It's an investment. 

I've always believed that learning and developing your skills is the best investment you can make. Even in my own business I use my credit cards with abandon when it comes to buying important books or traveling to meet amazing people. Even when I'm not sure if those risks paid off in the moment, I come to find out they always do. 

And if you're still not convinced, let me tell you a very short story about an investment a friend of mine made during his college experience.

It goes like this:

My friend went to a college not located in Washington, DC. He was not rich.

He eventually realized he wanted to work in politics.

He learned that getting an internship in DC was a really good way to get involved in politics. To him it seemed only rich kids were getting internships in DC because their parents could afford to pay for them to live there.

He decided that wasn't going to stop him.

He took out a $6,000 loan in college to help fund a semester in DC for an internship in politics.

Today he works in The White House. Literally. For real. The actual White House. Where the President of the United States lives. The President is his boss. 

You get the picture. ;) 

Invest in yourself. Seek out mentors and talk to financial aid advisors before making any big decisions. 

(If you want to learn more, my favorite financial book for young people is The Money Book for the Young, Fabulous, and Broke by financial expert Suze Orman. In it you'll also find she agrees with me that college is one of the BEST investments you can make - yes, even if that means taking out some student loans.)

Like any investment, there is risk involved, but the good news about college is you have control over most of the risk, because you're investing in yourself! The best way to reduce risk is to dedicate your 110% to your college education. 

What does that look like? Well, to find out I also recommend investing in some college success books! Invest in your learning and give your best. You are worth it.

To work or not to work through college...you actually do have a choice.

*Samsonite backpack winner announced @ the end of this post! =)

With the economy in the state that it is in and many community college students having to support sometimes not only themselves but also their families, work is a growing part of the college experience for almost all students.

And while working can provide great experience and help pay the bills, too often it stands in the way of students’ goals.

In one of my first college classes I sat next to this really smart girl who worked 30+ hours per week at a restaurant. She always looked tired, was often late, and it was obvious work was her first priority. One morning she got an essay back with a big fat D written on it.  She asked the professor about it after class and as I was walking out I heard him say to her: “you have to choose – work or school. You can’t have both.”

At the time I thought he was pretty harsh, but then I realized that he was absolutely right. It’s not that you can’t work and go to college – most people have no choice. But you can’t make both the top priority. And yet sadly what often happens is so many invest their time and energy into work and then have nothing left to give to college.

That smart girl in my class dropped out of college. I’m not sure if she ever went back; I think she still works in that restaurant.

The key is to remember is that if you truly invest your time and energy into your college experience you will make more money in your lifetime than you will make in those four years working at a restaurant (or wherever you work in college). Working in college gives short-term payback. But college is a lifetime investment that will pay off more than you can imagine if….and this is a big if….you truly invest your 100%.

This is the hardest part for students to wrap their heads around – especially those like myself who come from lower socio-economic backgrounds. We did not grow up with the concept of investment. Debt is the devil. We see it crush our parents. This is not a bad mentality when it comes to buying frivolous things like luxury cars or houses before we’re ready. But it can cripple us when it comes to our education.

I had to support myself 100% in college. In my first two years at community college – in addition to financial aid – I chose to take out a few small loans that were offered to me even though my tuition was already covered. My instincts told me not to do this because of my background. But my boyfriend at the time (now my husband) told me that investing in myself and my college education was one of the only times loans really made sense.

So I took his advice and nervously accepted a $3,000 subsidized (meaning government will pay interest while you’re in school) loan.

Now I didn’t use that money to go buy fancy electronics or a car. I used it to buy gas, pay my cell phone bill, and attend to other expenses that I would have had to work to pay for. I babysat on the side and invested myself 100% in college. And the credentials and grades and student activities that I was able to engage in led to my winning the $110,000 Jack Kent Cooke scholarship. Talk about a payoff!

Now while everyone may not win a huge scholarship, there are still so many scholarships out there that you could win by investing in your entire college experience. Scholarships that could pay you what you make in a year  of working. Scholarships that you disqualify yourself for when you work too much and study too little. 

So by now you’re probably thinking – well yeah Isa that sounds all nice and great I'd love to not have to work so much but I still can’t afford college if I don’t work!

Of course – I understand. Focusing 100% on college without having to work is a luxury. But it is also an investment and it is one you should work towards as much as you possibly can. There are three options I recommend, and if you’re don’t currently find yourself in one of these 3 options – change your situation as soon as you can. I would never be so definitive if I didn’t believe wholeheartedly that this information will help you achieve your dreams, make your life better, and help you make more money. 

1. Loans

I’m not talking about choosing the fanciest private school and taking out $30,000+ loans. When you’re being smart by going to a community college and then perhaps even a public college and financial aid is covering some of your tuition, don’t discount those subsidized loan offerings when you get your financial aid package. Loans are very serious and you should be strategic about them. If you accept the loans and promise yourself to use that money to replace working so often than it will be a decision that will pay off. Most of my friends who worked tirelessly in college and avoided loans like the plague are still in those jobs making hourly wages.

The key is discipline. You cannot spend that money frivolously or you defeat the entire purpose. It is an investment. An investment in yourself. If you use that money to give you more time to invest in your studies and your college involvement you will get a huge return on your investment.

To me, making the most of your college experience is one of the most guaranteed investments for your life and your future. Especially if you use the extra time that loans can give you wisely.

2. Flexible Job

If loans don’t cover everything the next step is to get a job that is flexible and will work around your college schedule. Babysitting always worked great for me because if I had a big test to study for I could always say no. If you have to work a job that doesn’t have anything to do with your future aspirations flexibility is key. It should never affect your grades or your college opportunities.

3. Job in your Desired Industry

If you do have to work in college the best way to make the time valuable is if you are in a job that adds significant related experience to your resume and/or gets your foot in the door of an industry or company that interests you. For example, one of my students wants to be a Disney event planner, and thus working quick service food at Disney is giving her the opportunity to network with professionals in the company she desires to work for. She’s already gotten to shadow an event planner inside the Cinderella Castle!

After you graduate the hardest and most ego-shattering part of looking for a job is that no one will hire you without related experience, and you can’t get related experience if no one will hire you. If you have to work in college it is smart to start gaining related experience as much as possible. While of course you won’t be able to get the exact job you could get with a college degree, you can get experience on the ground floor and learn a lot of valuable information about the company/industry and network with people who might one day hire you.

I know this isn’t easy but it is probably the most valuable advice I could ever give you. There is nothing that breaks my heart more than watching students fail their classes and eventually drop out because they had to work too much. I admire these students because they are just trying to do their best, to support themselves in a tough economy, and are doing everything they can with what they know.  

So now I hope you know more so you can work smarter and invest in yourself during this time.

You are worth the investment. Think long term. Do not let money (yes even the lack of it) control your life and your future. You can make a better decision. You can make more money than you ever thought possible. But you must invest in yourself now. Do not let the short-term rob you of your long-term success.

You are worth it.

If you need further advice on any of the options above or want to know more about how to really invest in yourself during college feel free to e-mail me at advice@communitycollegesuccess.com.

Congratulations to the Samsonite Backpack winner Brandon Hall from Elk Grove, CA!!!

To read more about Isa's personal story & how you can build relationships to: make positive friends, be more successful in academics and work, find the right people to connect with, and access the hidden job market, grab a FREE e-copy of the first chapter of Community College Success: How to Finish with Friends, Scholarships, Internships, and the Career of Your Dreams! Claim your free copy on the Facebook page!