Before You Get a Student Loan, You’d Better Read This
College is an exciting part of life, but unfortunately, not everyone gets it paid for by mum and dad –and that’s why there are student loans. Having to get a student loan is not always the most ideal, but if you’ve exhausted all your options i.e., getting a scholarship, a grant, part-time job or going to community college; then a student loan is the next best option.
Before jumping into any offer from lenders, here are some important considerations when it comes to student loans.
1. Choosing a Worthwhile School and Degree
The money you’ll be borrowing will go towards your education so you may as well pick a college and degree that is worth your while. No, we’re not talking about going to an elite private school and taking the most “sophisticated” degree. This is not a competition of who goes to the most prestigious school. This is your future and the financial decision you make today will affect how you live in the future.
College is a consumer product and like any company, several marketing techniques are used to market the exclusivity of these schools. And hard as it may be to believe but back in the 60s, it was normal for students to work over the summer and earn money to pay for a substantial amount of school expenses. But ever since the legislation of the Higher Education Act in 1965, students were allowed to take out big loans and, of course, schools took notice and began raising their tuition fees as well.
The truth really is, you can get just as good of an education in lesser-known, less expensive schools and have the college life that you want. Also, it helps to do research of your likely earnings in the field of study you’re choosing. Sites like Salary.com, Payscale.com, and Glassdoor.com can help you get a good idea what the salary of your chosen profession will be like. Once you find out what your salary will likely be, ask yourself these questions:
- Will this amount be enough to help me pay my student loans in the future?
- Am I ready to remove this sizeable chunk from my paycheck each month once I start working?
Adjust your options depending on what the answer will be.
2. Less is Sometimes More
Only borrow the amount that you need, not as much as there is available. It feels good to have all that money today but you’ll end up regretting it in the future when you’re stuck with a huge financial debt that your paycheck can barely keep up with.
It also helps to live below your means. A little sacrifice you make today goes a long way in making sure you don’t continue living like a broke college student well into your years as a young professional. That means prioritizing academic-related expenses like books and supplies.
You also want to think about the duration of your repayment. Will it be 10 years? 25 years? 30 years? Just remember, the longer it takes for you to pay back your student loan, the higher the interest rate will be. If you can afford it, go for the quickest route. It’s not only good for your wallet but for your well-being as well.
3. After Graduation Comes Debt
Once you graduate and start earning your own money working, expect to use a chunk that salary to pay your student loans. Don’t freak out! This is a normal part of life and facing it much better than putting it off tomorrow.
Most young professionals will turn away from their student loans because the numbers are too intimidating but the truth is, your debt won’t disappear and the longer you ignore it, the more you’ll have to pay because time equals interest. Do your future self a favour and strictly follow a repayment plan that’ll get you out of debt as soon as possible.
A good start is by setting up a monthly auto debit on your account. Some lenders will reduce interest rates if you opt to this way of repayment. It ensures you never miss a payment and you benefit in the long run thanks to the lower interest rates.
Going into debt at a young age is not uncommon. You won’t know any better until you actually graduate and get a job where you realise the true value of money. So take your time evaluating this decision. Do your research and develop a plan that you can stick to. The time you spend doing this will make a big difference in your future so be wise about it.
What other considerations should one have before taking a student loan? Share your thoughts in the comments!