student loans, systemic problems

The Mysterious Case of the Poorly-Defined “Living Expenses”

de facto

Okay everyone, today is the day that I disclose something about my debt that I don’t usually talk about. And the reason I don’t usually talk about it is because…well, to be honest, I only fully came to terms with it this week. It’s a tough and somewhat embarrassing topic for me, but I also think it’s a pretty important issue, so here goes.

As you may know, I have a lot of student debt—tens of thousands of dollars (perhaps someday soon I’ll muster the courage to disclose exactly how much…), all of which I accumulated over the course of my two graduate programs. Now, the term “student debt” implies that the money was put towards your education. And for many people in student debt, this is 100% true. But recently a friend of mine read part of my blog where I talk about how I got into debt, and she commented, “Oh, I didn’t realize that most of your loans were for living expenses.” And although of course I knew that that was true, it wasn’t until a couple of days later, when I found I couldn’t get her observation out of my head, that it really hit home:

I had been using my student loans like many people use credit cards.

Although I am technically in “student debt”, it would also be accurate to say that I am, in a certain sense, in consumer debt. This is humbling, as I confess that I’ve said to myself many times, “yes, I’m in debt, but it’s student debt, and that’s a little different.”

But it’s really not that different. Like many graduate students who teach or do research in exchange for tuition, I’ve never had to pay the bursar’s office much of anything. I think there are a few minor exceptions, like one or two individual summer courses that weren’t covered, but I think it’s fair to say that 90% of my loan money went towards living expenses.

Now comes the mysterious part. The thing about “living expenses” is that this term could refer to literally anything. Anything!!! If you a) are living, and b) have an expense (i.e., you purchase something), then you can pretty much refer to this as “living expenses” and nobody is really going to question you.

It wasn’t that I used my loan money to buy a pony or a yacht or a Lamborghini. I definitely didn’t. But on the other hand, I also didn’t make as concerted an effort to be frugal as I could have. The loans felt like free money, and I used them as such. Yes, some of them went towards rent and gas and groceries, but I also bought clothes and shoes and earrings and books (not just textbooks but also regular old books to feed my regular old book-buying habit). I used them for eating out, for buying gifts, for a bit of travel, and so on. Nothing crazy, and I remember thinking that I was doing a pretty good job of not going overboard, but I had no business pretending I had disposable income…because I didn’t.

It’s really hard for me to understand what I was thinking at the time—most of these decisions were made between 2007 and 2011, which is a while ago. But I’ll try to break it down. I think there were two components:

  1. Having never tracked my spending, I had no idea how much it cost me to live from month to month. This meant that I did not have a sense of how much I would need to take out in loans to maintain my current lifestyle, and so I just took out a pretty large amount to be safe. And once that money was in my bank account, it felt like my money, and so…I spent it. I also didn’t think actively about how much money I would need to make in a future job in order to pay off the loans (and their interest) in a timely fashion.
  1. I had heard a lot of people say things like, “Education debt is good debt!” and “Don’t worry, you’ll pay it off in no time once you’ve graduated” and “This is an investment in your future.” And I just accepted those statements at face value.

Again, one element of this that’s troubling to me in retrospect is that during both of my degrees, I was getting paid by my school for doing research and/or teaching. So I probably could have swung it without taking out loans, or at least I could have taken out far fewer. During my first degree the yearly stipend was only $12,000, but since the program was not a particularly rigorous one, I definitely could have taken on a part-time job to supplement my income instead of spending my free time watching House (I mean, House is great, but sheesh).

So yeah. I wish I had taken on that job. I wish I had opened up an excel spreadsheet and done the math. I wish someone else had forced me to do the math. I wish someone had explained budgeting to me. I wish I had been more conscious about my spending. I wish I had viewed my education as a financial investment in my future. I wish…

But wishing isn’t going to get anybody anywhere. I made the choices that I made, and this is where I am.

So, my goal right now is to try to have some compassion for my younger self. I really do believe that for the most part, people are usually doing the best they can, given the resources and information available to them. And I think that was true for me as well: I was doing the best I could at the time.

But if you know any students or soon-to-be students who might be thinking of taking out loans for living expenses…maybe send them a link to this post. Also to this post by Jaymee, which I wish had been around eight years ago for me to read.

What do you think about the fact that students can take out
huge amounts of loans for “living expenses”?

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  • Reply Des @ Half Banked October 27, 2015 at 8:33 AM

    This so easily could have been my exact story for my undergraduate degree, I can’t even tell you. By a combination of pure luck, family support and a few really generous scholarships, I managed to avoid student debt, but with my spending patterns, I really shouldn’t have. I took the exact same approach – to the letter – of thinking that if I had the money in my account, I should spend it.

    I worked part time, in a mall downtown, where I paid $15 a day for parking. After buying my lunch at the mall (!) and buying a latte every shift (!!), I’m pretty sure I was working for the fun of it. These are (clearly) expenses I wouldn’t even be able to justify to myself now, and I’m making way more than I was in my part time student days! (Thankfully.)

    I guess my point is just that I’m glad you’re being gentle with yourself – I think this is a wakeup call that everyone gets at some point, and unfortunately the size of the fallout is mostly a combo of luck and circumstances. I think it was so brave of you to own this and tell your story, because it’s something people should definitely talk about more! Super-huge kudos.

    • Reply Sarah Noelle October 27, 2015 at 11:16 AM

      Thanks, Des. 🙂 I’ve been kicking myself a lot about this stuff lately, but what’s done is done and at this point I can only accept it and move forward with more wisdom than I had before. I do feel really, really good about the fact that I’ve finally woken up and started paying attention to money, and even made some substantial changes in my spending and saving behaviors.

      Your mall job example is so great! I think I did almost the exact same thing when I used to work at a bookstore for $8/hour: I’d have to pay for gas and parking, I’d always buy my lunch at the burrito place next door, and then I’d always buy a fancy Starbucks drink and a fancy Starbucks pastry as an afternoon snack. Plus I was constantly buying books because I got a 35% discount as an employee (guess I forgot about the fact that 35% off means you still have to pay the other 65%…)

  • Reply C@thesingledollar October 27, 2015 at 9:07 AM

    Sigh. Co-signed.

    • Reply Sarah Noelle October 27, 2015 at 11:08 AM

      Sighs all around. :/

  • Reply A.J. October 27, 2015 at 11:12 AM

    Thanks to the spreadsheets you shared with me, I have only recently understood how much it takes me to live month to month. So thank you for that.

    I think about how much of the taking loans for living expenses was helped by the way these loans were presented to you, and how easy it was to acquire them. I wonder if that wall had been more difficult to climb if it would have slowed you down. On the other hand, it is helpful to people to have easy access to loans when they need it.

    • Reply Sarah Noelle October 27, 2015 at 11:37 AM

      You’re welcome! I am prouder of that spreadsheet than any other I have ever made, and that includes my dissertation data spreadsheets in my lab.

      Yes, I definitely think that universities try to sell you on their programs by saying, “This is totally within your grasp! And our degree is so valuable that you will have no problem getting an amazing job and paying everything back upon graduation!” It’s really tough. I think a cool (though unrealistic) idea is if, before students were allowed to take out loans, they were required to track their current spending for a few months, do some calculations, and come up with numbers like, how much do I need to live during one month throughout this degree? How much will I make per month if I get a typical job in this field after graduation? How much will my monthly payments be if I take out this much money in loans? I think some simple exercises like that would help a lot.

  • Reply Will @ Phroogal October 27, 2015 at 11:55 AM

    If I remember right, I had a friend who used student loans to modify his sports car. Now is that still good debt? Ha.

    • Reply Sarah Noelle October 27, 2015 at 11:58 AM

      That’s an excellent example, Will! Lucky for me that I wasn’t into sports cars. 🙂
      Thanks for stopping by!

  • Reply Jennifer October 27, 2015 at 12:39 PM

    I’m pretty sure you’re not along in this boat. I’m ‘fortunate’ in a way – I quit university before I racked up too many student loans (and also fortunate I’ve been able to piece together a decent living without said degree.)

    I worked while in school, but I’m 100% confident that if I had stayed in Uni I would have gone down the exact same path you did – so don’t beat yourself up too much. I think you’re about my age (I’m 34) and if so, we went to school at the end of the boom years, when there was no doubt in anyone’s mind that all the money spent on school was going to pay off.

    It’s great that you’re sharing this. I this this (and Jaymee’s post) should be required reading for high school seniors. My guess is the information that they are giving young people these days isn’t much different from what we got – that student debt is ‘ok’ and not to worry about it.

    • Reply Sarah Noelle October 27, 2015 at 12:58 PM

      Yes, I agree that good information about financial matters (or lack thereof) is key! I think it’s tough because this type of advice can often *appear* to be at odds with the message that education is important/valuable. I definitely believe in the value of education, but in my case, I could have gotten the same education at a much lower cost (if that had been my goal).
      I reeeeeally want to find a way to raise awareness about this on a larger level — this is something I think about a lot. I can tell individual people my story, or post it on my blog and reach a few more, but I wish there was a way to reach the hundreds of thousands of students currently thinking about how to finance college and/or grad school.

  • Reply Taylor @ Freedom From Money October 27, 2015 at 12:44 PM

    Thanks for sharing this post and for your honesty, Sarah. Financial regret is such a tricky thing to shake. For me, my biggest money regret is not negotiating my salary at my first post-college job (aka: the job I currently work). I think about it ALL THE TIME. But I love what you said about showing compassion for our younger selves. I agree, that our younger selves did the best they could and I appreciate all the work younger me did for future me. It sounds like you are the path to financial freedom and security, so younger you obviously did quite a few things right as well 😉 Thanks again for sharing. Student loan debt (and just debt in general) is the worst, but it will be a thing of the past before we know it!

    • Reply Sarah Noelle October 27, 2015 at 1:02 PM

      Thanks for your comment, Taylor. 🙂 Financial regret is definitely tricky to shake. I feel like my main messages on this blog are that you shouldn’t let your debt take over your life, and that it’s not too late to make a big difference in your finances…but even though I DO truly believe these things, it’s still easy for me to feel regretful at times.
      I love what you say about “younger me” doing a lot for “future me” — that’s so true! Younger me may have made some uninformed/questionable decisions, but I’m also proud of a lot of the growth she went through over the years. 🙂

  • Reply DC @ Young Adult Money October 27, 2015 at 10:29 PM

    Interesting to read your reflection on your student loan debt. I have always heard that people in grad programs who are getting paid for research, etc. typically take out loans for living expenses. You raise a great point, though: what are living expenses? It can be anything. It also doesn’t really force you to think hard about your spending because you can justify them by saying they are needed for “living expenses.” Really interesting take and honestly I think most grad students are very similar to you as far as how loan money is treated.

    • Reply Sarah Noelle October 27, 2015 at 10:52 PM

      You know, it’s interesting: I’ve actually met a lot of people who have been able to make it work on just the grad student stipend. For some of them, this is because they’re being partially supported by a partner, but some people are able to make it work independently. Whereas I just figured, hey, I’m an adult, I deserve to be able to buy what I want, even if it’s with borrowed money. The idea of reducing my spending for the sake of getting a cheaper education literally did not occur to me.
      I do agree though that I am probably not the only one with this type of history. I wish entering grad students were required to do some calculations before they could take out any loans.

  • Reply Fareeha October 28, 2015 at 2:16 PM

    Great post, Sarah. The expenses rise exponentially whereas the income doesnt… u have really raised some very valid points..

    • Reply Sarah Noelle October 28, 2015 at 7:46 PM

      Thanks, Fareeha. Yes, actual income and borrowed money can feel like basically the same thing once they’re in your bank account. I’m glad that I at least understand that going forward, so that I can avoid this type of situation in the future.
      Thanks for stopping by! 🙂

  • Reply Our Next Life October 29, 2015 at 1:27 AM

    I love that you’ve taking the compassionate view toward your younger self. I’m absolutely positive that you made what felt like good decisions given the extremely limited and skewed information you were receiving. Two things to share: 1.) I absolutely took out student loans to pay for living expenses, stemming from going to school in an extremely expensive urban area. I even had a full ride which covered much of my living expenses, but I still graduated with about $10K in student loans, which is so ridiculous in hindsight but made perfect sense at the time. 2.) If you were going to use your student loans as credit cards, it’s better than using actual credit cards! I *also* graduated with about $12K in credit card debt on top of that student debt, and on top of all my expenses having been “paid for” by my scholarship. Sigh. I would much rather have had $22K in student loans than the bigger chunk in credit card debt, because at least then you get a much lower interest rate and some different repayment options. Oh well… live and learn!

    • Reply Sarah Noelle October 29, 2015 at 6:49 AM

      Wait, you had student debt and credit card debt, and you’re still on track to retire early? That’s amazing! And so encouraging! I’m not sure that retiring early is in the cards for me, but it would be so great if I could even catch up to the point where I can retire “on time” and be financially secure. I know everyone’s circumstances are different, but seriously, this gives me hope!
      And yes, I do hear you about the interest rates; that’s a really good point. Student loan interest rates are still higher than they should be, in my opinion, but they’re nowhere near the rates for credit cards.
      Thanks for your comment!

  • Reply Hannah October 30, 2015 at 6:08 AM

    Although most grad students tend to lead pretty frugal lives, it frustrates me that student loan debt is in fact consumer debt for many grad students. I perfectly understand the justification for offering such loans, but I wish more students had the foresight to realize that its not good for them.

    My husband is a grad student and actually receives a stipend in addition to free tuition (science program), but we still get offers for private student loans all the time. I hate to say, but we casually considered using one to buy a house because we were only a few thousand short, and we would have a few years before interest started acruing. Ultimately, we snapped back to reality and committed to no debt, but you can do some serious stupid with student loans if you want.

    • Reply Sarah Noelle October 30, 2015 at 8:00 AM

      Oh man, private student loans are scary. Mine are government loans, fortunately (but they still stink).
      I can totally, totally understand the temptation to use student loans to top off your house-buying fund (and am happy for you that you thought twice about it!). It’s so tempting — student loans really do feel like an easy way to get money to buy things you “need”. But of course, if taking out loans weren’t a possibility, then we’d necessarily find other ways to cope. The hard part for students, I think, is recognizing that even though the loans are available to us, we can still turn them down.
      Thanks for commenting 🙂

  • Reply $iddhartha November 14, 2015 at 12:50 PM

    This advice may not affect your particular situation, but it may help someone.

    If you have undergrad loans and graduate loans at different rates (in my case 4.5% and 6.8%), there is a strategy I used to pay less in interest. You pick the lowest repayment option possible which is typically graduated extended term or something to that effect. Then with your extra money you pay down the higher rate loan first. This strategy allows you to pay more to the higher rate loan than you would on the default 10-year repayment plan.

    I know this sounds like common sense, but I’ve talked to many professionals who don’t do this despite having loans at different rates.

    • Reply Sarah Noelle November 14, 2015 at 1:50 PM

      That does sound like a good strategy. I don’t personally have any loans from undergrad any more, but it might be a useful suggestion for others, as you say.

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