Student loans are like a gateway drug to destructive financial behavior.
At least, that's how John Smith sees them.
"I took out all of the loans I could," says the University of Oregon graduate, who is now 46 years old. "What I didn't realize was the habits it would create."
In a matter of a few years, Smith went from paying out-of-pocket for school - attending when he could afford it, working when he could not - to staring down more than $40,000 in student loan debt.
Instead of living paycheck-to-paycheck and putting any extra in savings, he was suddenly flush with cash. His financial aid allowed him to live an expensive lifestyle in college, he says.
The tipping point was when he approached the school's student loan office to get help with his $3,000 tuition payment, he says. He walked away with $16,000 for that quarter, starting a cycle that would continue for the rest of his undergraduate career.
"Every quarter I got more free money," he says. "I needed new clothes. I needed a cool car. I needed a nice place to stay."
Smith bought a Jeep, stereo equipment, televisions and more. What he didn't spend, he invested, and lost.
[Discover 10 steps to minimize student loan debt.]
When he graduated in 1997 with his bachelor's in sports marketing and management, Smith was confronted with a harsh reality. At $1,400 per month, his student loan payments were double his rent, and he was unemployed.
Smith's college lifestyle was lavish - but it's not entirely out of the ordinary.
Many current and former college students can tell tales of friends who used excess student loan funds to purchase cars, party or go on spring break trips.
Christina Meehan splurged on a trip to Italy when she received one of her student loan refunds.
"I always took out way more than I needed," Meehan said in an email. "I thought of it as 'free money' that I would eventually have to pay back when I was living like Carrie from Sex and the City."
Now 31, with a bachelor's and two master's under her belt, Meehan's student loans total nearly $200,000. She currently works as an online media manager at Rosemont College in Pennsylvania, but said she makes less now than she did straight out of undergrad.
In some cases, the borrowers are so-called nontraditional students. Over the age of 25, these undergrads are considered financially independent from their parents. More than 50 percent of students pursuing a bachelor's degree fall into this category.
Some, like Smith, have families of their own. Others are saddled with expenses such as medical bills and car payments.
With minimal income - either because of unemployment or underemployment - they have little-to-no expected family contribution, a figure the U.S. Department of Education uses to calculate need. This often allows students to take out federal student loans to cover the full cost of attendance, including housing, personal and living expenses.
The University of Oregon estimates the total cost for undergraduates living off campus at nearly $24,000 for the 2013-2014 school year. Less than $10,000 of that goes to tuition, leaving students with refund checks of roughly $14,000 each year.
While these refunds are intended to go toward educational expenses and living expenses - food, rent and utilities - no one monitors how students spend this money.
Christina Mascaro and her husband Justin Krudop maxed out their student loans in order to pay bills such as car loans and credit card bills.
"He was coming out of the Army, I was coming out of a divorce, and we desperately needed those funds," Mascaro said via email, adding that at the time the two were not married, living separately and each making about $8 to $10 per hour.
[Learn how to take control of student loan debt.]
The pair also used $6,000 of student loan funds from Krudop's final year at Texas State University to start a seasonal tour business in Estes Park, Colo., which is now in its third year of operation.
"We figured if we broke even we didn't lose anything and we could always go get 'careers' after the season," she wrote. "If we made a little more money we'd consider it a well spent vacation."
Using their student loan money as startup capital was the couple's only option, Mascaro said, noting that she and Krudop had both previously filed for bankruptcy.
"In retrospect, I think we made the right decision," she wrote, noting that Estes Excursions made $20,000 in its first season and now brings in close to $47,000 a season, which runs from mid-May to Labor Day.
Mascaro and Krudop, both 30, currently have close to $78,000 in student loan debt, the bulk of it federal direct loans. Outside of their seasonal business, Mascaro - who graduated from Michigan State University in 2010 with a degree in journalism - makes roughly $29,000 per year as a Web designer.
Her husband, who earned a bachelor's in anthropology in 2011, has yet to secure a full-time job.
Combined, the two pay $250 a month toward their student loans on an income-based repayment plan.
"The worst part is, we have to save our cash to buy a house," she said. "Because our student loans are now so high, together, we cannot finance a house."
Meehan is in the same boat. She used both federal and private lenders, and despite consolidating her loans, recently defaulted on one of them.
"I'll probably never be able to purchase a house, car or even get a credit card," she wrote. "All for cute clothes over a decade ago!"
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