Finances: Using “Extra” Loan Money on Vacation Was a Financial Mistake

Right on the heels of my previous post is a suggestion for all current college students to avoid taking out the maximum student loans in order to travel the world. Lest anyone got the wrong idea, I think a follow up is necessary to shed light on the fact that I used borrowed money to pay for my portion of that trip to the Bahamas. More blatantly, I made a mistake, and learned from it, albeit a little too late.

By no means do I regret travelling, ever. There’s a lot to glean from expanding horizons and investing in your world view. You learn things about other people and other places, as much as your own home and yourself, that you will never learn in a classroom. And I paid an arm and a leg for a classroom. So it’s worth paying to travel. But it’s NOT worth spending borrowed money, which equates to borrowed time.

In your early twenties, it seems like a wonderful idea and the repercussions are not so easily visible. For the first time, you have the ability to have access to “extra” money, and the calling to reward yourself during seasonal breaks is all too strong to resist, but resist you must.

I was advised to take out my maximum student loans from the get go. You know, just in case. As in, just in case I find something else to spend that money on. Which, for a young twenty-something, isn’t entirely too difficult to do. I was told that once I was a dentist, I would have no problem paying it back. The premise was that I would be making so much money that it would be easy to get rid of that debt quite quickly. So worry about it later. What appeared odd to me was that when I got close to graduating, I kept being fed this “worry about it later” mantra. I was told I could (and should) put loans on the back burner for another twenty five years under a loan forgiveness program. Because by then, I’d be like, a millionaire or something, and it’d be suuuper easy to pay it back, surely. Which is the same reasoning they fed me when I started dental school. It was then that I woke up, and realized that all people are saying are “worry about it later.” I started worrying about it NOW and when I did, I realized that I was sold a lie.

Unfortunately, the realization hit me a bit too late. Towards the end of dental school, I had accumulated “extra” money, read as extra loan money. We took that trip to the Bahamas, and I wanted to pay my share for the trip. You know, with my “extra” money. I’d call myself a downright fool for ever thinking that borrowed money is money worth spending. Especially on frivolities such as trips. As a young twenty-something, I still did not have a full grip on the daunting largeness of my student loans. What difference does a few extra thousand make? Well, glad you asked (because I surely did not)!

Warning: The example below is not as hypothetical as it seems. 

Assuming you take a $550,000 loan out, but towards the end of your schooling, you had an extra $5,000 left. You decide to take an international trip and reward yourself for all your hard work. So instead of using that extra $5000 to decrease your loan to $545,000, you keep your loan at the maximum $550,000. If you decide to do a 10 year standard repayment plan such as I did, the difference after ten years is about $7,000. Which means that instead of a $5,000 trip, it was actually a $7,000 trip. That’s a 40% increase from what you thought the trip originally cost, assuming no inflation occurs in ten years (unlikely).

For those unconvinced, they ask, what does a difference of $7,000 make in a loan so large? The literal answer is slightly over a month of loan repayment. But the non-visible answer is hundreds of patients, hours of static postures, tens of times recharging your loupe lights, and more than a few times that your back aches, your eyes become strained, your fingers cramp, and you come across a stressful situation. It’s a month of your life spent earning an income and getting nothing out of it. Well, except a trip that you took in your twenties. So the real question is, how much do you value a month of your life?

The answer depends on what camp you fall under: YOLO or JOMO. If you fall under YOLO, then yes, maybe the trade off isn’t so bad. If you fall under JOMO, then the outcome isn’t so good. For the record, I did not regret that trip. I just regret the resources I used to get there. But hey, at least it wasn’t an engagement ring!

For those interested in traveling while in school, might you try travel hacking instead?