4 Questions to ask yourself before taking a Student loan
Student loans can be a quick way to fund a college degree but they also come with many strings attached. According to Forbes, there are more than 44 million student loan borrowers in America with over $1.75 trillion in student debt. This is $28,750 on average per borrower.
Student loans have been called one of America's biggest financial scams by Forbes. This makes them a very controversial subject, whether students know it or not! I've put together a list of tips that you must consider before you take up student loans.
Do you need student loans?
The answer to this question depends on your situation. If you're lucky enough to have a family that can help you cover the cost of college, then perhaps you can avoid student loans altogether. However, for many people, it's not so easy.
If you're planning on going to college and don't have a way to pay for it yourself, then yes, you need student loans. Student loans are the only way that most people can afford to go to college these days.
However, you should know that the cost of college is rising at a much faster rate than inflation. The cost of attending college has been increasing at a rate three times faster than the increase in median family income. This has made it more difficult for students and their parents to pay for college without taking out student loans.
Student loans help you pay for college and reduce the cost of higher education for everyone and give you more options when choosing your school. However, more students who graduate from college with student loans are struggling to repay these loans because they don't have much money, to begin with.
How much do you really need to borrow?
The answer to this question is not an easy one because many factors can affect how much you will need to borrow for student loans. These include your education, your field of study, and how many years you plan to attend school.
The first thing you want to do is determine how much it costs for you to attend school. You can do this by looking at the cost of tuition and fees as well as any other expenses associated with attending college such as books, transportation, or housing costs. Once you have calculated all of these costs, add them up and divide them by four (or five if you plan on living on campus). This will give you an idea of how much money per month you will need while in school.
Next, look at what type of degree program you are going into and what kind of job opportunities it may lead to after graduation. If your degree requires a lot of time in school and doesn’t offer good job prospects upon graduation, then it may be better for you to pursue a different degree program that has better employment opportunities after graduation.
However, you must make sure you are not borrowing far more than may ever pay after graduation.
Are there other options to pay for your education?
Student loans are not the only way to pay for higher education. There are alternatives to taking out loans.
Scholarships and grants
Financial aid can take many forms but one of the most common is scholarships and grants. These are free money given by schools or organizations that want to encourage students to pursue certain careers or academic fields. Scholarships can be merit-based (based on grades or test scores) or need-based (based on how much money your family earns). To apply for financial aid, fill out the Free Application for Federal Student Aid (FAFSA), which covers federal loans and grants as well as private scholarships.
Work-study programs
A work-study program allows students to earn money by working part-time on campus during the school year and full-time in the summer. Some schools require all students to participate in work-study, while others offer it as an option for those who have trouble affording books, housing, and other expenses. Work-study wages vary from $10 per hour up to $12 per hour depending on your location and field of study.
Understand the terms of the loan.
The term of a student loan is the length of time you are required to repay your loan. There are two main types of student loans: federal and private. Federal loans are funded by the government, and private loans are funded by banks or other financial institutions.
Federal Student Loans
The term of a federal student loan varies based on the type of loan. For example, subsidized loans have a fixed interest rate for the entire life of the loan. That means that you will never be charged more than what your interest rate is set at when you borrow it. Unsubsidized loans also have a fixed interest rate for the life of the loan, but this type does not include any benefits like grant money or work-study earnings to help cover the cost of college.
Private Student Loans
The term for private student loans is much shorter than other types of education-related loans because they don’t offer any benefits such as deferment or forbearance options if something goes wrong with your finances during repayments like unemployment or disability. Private lenders often charge higher rates because they typically aren’t backed by the government like federal student loans are.
The interest rate on a student loan varies depending on the type of loan and when it is taken out. Different interest rates apply to federal direct loans, private loans, Perkins Loans, Federal Family Education Loans (FFEL), and Alternative Loans. The Department of Education publishes more student loan information here.
If you take out a student loan without knowing what you are getting into, you may end up paying more than you should and may not even graduate from college.
Conclusion:
Student loans can be a great investment in your future. They give you the chance to earn a degree or professional certificate and build a better life for yourself and your family. But they also come with risks, including the possibility of having to pay back more than you borrowed.
Here are some tips we covered:
Check if you need the student loans.
Be sure you are getting the amount you need.
Look for other options which you can utilize to further your education.
Understand the terms of the loan before you borrow.
