Should I take out a student loan?


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As tuition costs continue to rise, you may be thinking “Should I take out a student loan?” Here is some help answering the question. (Shutterstock)

Each year, thousands of students turn to student loans, especially federal student loans, to cover their college expenses.

But as important as a college education may be, is it worth going into huge debt? If you take out student loans, there is no guarantee that you will find a job or career that pays enough to justify the cost of your education. Let’s look at some reasons why you should consider taking out a student loan, as well as why you shouldn’t.

Visit Credible for view your prequalified student loan rates from various private lenders, all in one place.

3 reasons to take out a student loan

Despite rising tuition fees, getting out student loans covering college expenses could make sense for several reasons.

1. You may qualify for student loan forgiveness

The federal government offers several student loan forgiveness programs that can eliminate a significant portion of your student loan debt, making paying off your loans more manageable. Some programs, such as Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness, are only available to qualified students working in specific fields or for government or nonprofit organizations.

If you don’t qualify for these programs, you can also get your federal loan forgiven by enrolling in one of the income contingent repayment (IDR) plans available from the federal government. Depending on the plan, your debt balance is canceled after making qualifying monthly payments for 20 to 25 years. The canceled loan amount is currently tax exempt with this option until the end of 2025.

2. You may not have to pay anything while you’re still in school

When you receive a federal student loan, it is either a subsidized loan or an unsubsidized loan. With subsidized loans, the federal government pays the accrued interest on your loan as long as you attend school half-time. If you qualify for subsidized loans, you don’t have to worry about fees until the end of the six-month grace period after you graduate or complete your studies.

3. You have no other way to pay for college

There’s no getting around it – college is expensive. Some students may have an easier journey if they receive financial support from their family. Scholarships and grants can often cover most, if not all, of your tuition and other university expenses. But not everyone is eligible for this kind of help, and the competition for awards is often fierce.

Student loans may be your best option if you want to go to college and have no other financial means to do so.

3 reasons not to take out a student loan

As useful as student loans are, going into debt has some downsides. Here are some reasons to consider not taking out student loans to finance your education.

1. College is expensive

A college education represents a significant financial burden for most students. The average monthly student loan payment is $393, according to the Federal Reserve. Combine that with a mortgage or rent payment and a car payment each month, and you can quickly see how lingering student loan debt can bloat your monthly budget. Unless you are entering a higher paying career field, you may find it difficult to advance financially.

2. Student loan debt can delay other life goals

Depending on the amount of student debt you accumulate, paying off the loan could take decades. If so, it could cause you to delay or abandon other personal and financial goals, such as buying a house, getting married, having a baby, and saving for retirement.

3. You still have to repay your loans even if you haven’t graduated

Even if you never finished school or graduated, you still need to pay off your student loans. Whether you drop out, run into difficulties, or change your plans, you are financially responsible for any loans you have taken out to attend college.

How to reduce the cost of college tuition

Whether or not you take out student loans, there are ways to ease the financial burden of going to college. Consider the following tips to save money on your college education.

Exhaust federal financial aid options first

If you are looking for help through financial aid, start with the federal options. First, you will need to complete the Free Application for Federal Student Aid (FAFSA). The US Department of Education uses the information you provide on the FAFSA to determine your eligibility for federal assistance programs, such as grants, work-study programs, and student loans.

Federal student loans are guaranteed by the federal government and come with borrower protections that you won’t find with most private student loans. Protections you can access include:

  • Loan deferral
  • Loan forbearance
  • Student Loan Forgiveness Programs
  • Income Contingent Reimbursement (IDR) Plans

Private lenders generally offer less support if you are struggling to repay your loan. This is why many students tend to use private student loans to cover remaining college expenses after exhausting federal aid options.

Qualifying for a private student loan also generally requires having good to excellent credit. Most students haven’t had enough time to build their credit to the level needed to qualify for private student loans. The other option is to apply using a co-signer with good credit. While adding a co-signer can help you qualify for a private student loan, the financial burden falls on your co-signer if you can’t make your monthly payments.

Search for scholarships and grants

Scholarships are a great way to cover university expenses. Some scholarships are open to all students, while others carry specific qualifications. Grants are another type of financial aid. The federal government offers several grants, but you can also find them through your state and local government, businesses, and organizations.

Scholarships or grants do not need to be repaid, unlike student loans. Use the Free U.S. Department of Labor Scholarship Search Tool to search thousands of available scholarships, grants, and other financial aid opportunities.

Choose an affordable college

Look for low-cost colleges and universities that offer the desired degree program. Consider attending a local college to save on housing and living expenses. Attending a community college first can help you save money and eliminate most of your core coursework before transferring to your school of choice. Also, factor in-state versus out-of-state tuition into your college decision. Many schools charge more for non-resident students.

Make interest-only payments while you study

If you have unsubsidized student loans, paying interest only will help you save a lot of money on your overall student debt. Private lenders start charging interest on student loans as soon as the loan funds are disbursed. Many private lenders allow you to pay interest only. Take advantage of this option if you have the financial means during your studies.

If you’re ready to apply for a private student loan, Credible makes it easy to see your prequalified student loan rates from several lenders.


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