Why Student Loans Are Nothing to Fear
Student loans suck the oxygen out of almost every conversation you hear regarding higher education. And it’s understandable, we suppose. After all, the rate of growth isn’t slowing down.
Even so, it’s a debt that, most borrowers will agree, is wholly worth it. In the following article, we’ll be talking about the reasons you shouldn’t fear student loans. We’ll also be offering valuable suggestions for how you can save money along the way. Let’s begin!
1. They Lead to Something
Yes, an education costs way more than it should, especially in this age of technology. But when you compare the earnings of college graduates to those who don’t graduate from college, you see why so many support the concept. To help clarify, let’s return to the “wholly worth it” hyperlink above.
According to national poll conducted in March by Morning Consult, 61% of adults said that, even based on their “current financial situation,” taking out student loans was worth attending college. More than twice as many said loans were “definitely” worth it (35%) as said they “definitely were not” (16%).
A majority of all age groups, including those in school now and those most recently in the workforce and paying down the most debt, said loans were worth it. Generation-Z, which the poll identified as 18-21 years old, said loans were worth it by a margin of 79% to 19%. Even among Millennials, ages 22-37 and the generation with the most student debt, 56% said the loans were worth it.
It’s probably not surprising that among student borrowers who now make more money or have attained higher degrees, even more support taking student loans. Those who earn $100,000 a year or more think loans were “worth it” by 80 points – 79% to 19%. Those with at least a bachelor’s degree say loans were worth it by a 72 to 26 margin. Of course, proving the point, high earners and college graduates are heavily correlated groups.Derek Newton, Forbes Contributor
So many people can’t be wrong. A college education takes you further than the alternative.
2. Ease of Repayment
We don’t want to make light of this. But when compared to other types of loans, student loans offer you a more flexible time frame and payment terms than, say, a car or home loan. If you get under water on a college loan, there are options you just don’t have on the other side.
For starters, you don’t even start repayment until the education is already in-hand. If you fall behind, your degree can’t be repossessed or foreclosed upon because you’ve already earned it.
Missing such payments on your home or car can leave you without a place to live and a means of transportation. It also can dramatically affect your health, well-being, and future earning power.
3. They Are Universal
In other words, they’re nothing to be ashamed of. Virtually every working American — and quite a few unemployed ones — have had to live with the burden of student loan debt. It’s not an indicator of your character.
When you start realizing that we’re all in the same boat, it becomes easier to seek help when you need it, learn from one another, and gradually work your way toward a debt-free future. So don’t sweat it. Because the higher up you go in your educational journey, the more debt you’re likely to incur.
4. They Can Be Viewed As an Investment
Thinking of your education as the return on investment that it is will prevent you from making any rash decisions like dropping out or aiming too low. We would encourage you to be a little more cautious about how you spend your investment dollars, however (i.e., loan money).
Don’t make the mistake of assuming that every degree offered by a university will be worth what you put into it. Education is currently in a state of reform as this goes, but there are still plenty of degree plans out there that offer no discernible path to earning a living. Avoid them at all costs.
And don’t be afraid to think outside the box. Perhaps you’re better off going to a technical school and saving your degree for later in your professional career after you have a clearer picture of the path you’re traveling.
5. They Are Easier to Control Than You Think
Most people think of college as one-price-fits-all, or expensive-equals-quality. Both mindsets are wrong. You can get a quality education at a four-year state college, and at the undergraduate level, it’s just as good as anything you’ll get from a “more prestigious” university.
These days a four-year bachelor’s degree is the bare minimum to a more lucrative career. The master’s degree and doctorate work carries more weight, and you can wait until these stages to target the marquee institutions.
While doing so won’t necessarily keep you from borrowing money, it’ll reduce the most expensive part of your education. If you throw in a free community college for your associate’s work, then you can really reduce the overall amount you have to borrow. And don’t be afraid to take on work-study opportunities throughout school, graduate and post-graduate. These jobs often are low-hanging fruit and allow you a way to pay for more of your education without greatly affecting study times.
6. They Do Not Have to Be Repaid Right Away
Take your time. The interest rates are comparatively better than other types of personal loans you can get. They allow you to take a forbearance if needed. More on both of these avenues in a bit. The point here is to not hit the panic button.
You can take 10, 15, or even 20 years to repay them. They can be refinanced with other debts along the way as your financial situation shifts and improves. You’re not on as much of a ticking clock as you think you are. And as long as you keep making the payments, they’ll never prove to be a credit risk.
7. You Can Get a Forbearance If Necessary
It’s very important that you act in good faith with your student loan organization if you can’t afford to make payments. Repayment should be your ultimate goal, and the fact that most bankruptcies aren’t going to let you discharge them only exemplifies the reality that there is no way out but through.
So should you run afoul of payment deadlines or your work situation abruptly gets worse, take the proper steps. Reach out to the holder of the loan. Explain what happened and what you’re capable of doing to keep momentum from stifling. If you absolutely have to get a forbearance, they’ll work with you. But your options are predicated on responsible financial behavior, so never cease to be communicative.
8. They Are Much Better Than the Alternatives
Getting a loan from a credit card or a traditional bank outside the subsidized loan system will result in stricter repayment terms and higher interest (provided you haven’t established much credit, of course).
Student loans usually run lower than traditional interest rates for the average student borrower. If you don’t believe us, try to get a comparison from one of your local banks. You’ll wonder how it’s even possible to repay everything under those terms.
Of course, we’re assuming here that you’re on your own. If Mom and Dad are using their credit and co-signing for you, it’s a different story. But not everyone has that luxury.
9. They Will Pay Off in the Long Run
Over the course of your life, you’ll reap many more benefits from your college education than you will ever have to pay out. Let’s say you get a four-year degree, and it costs you $50,000.
If the average college graduate earns just $500,000 more over the course of their working careers (let’s call it 28 years), then that’s 10 times the return on investment you otherwise would have enjoyed. This type of result is not unusual, and it often results in far more earning potential than that.
This may be hard to see when you’re struggling to make payments, dealing with forbearances, etcetera. But the data is indisputable. And while some higher-end degree plans can result in far greater amounts borrowed, the resulting higher salaries correlate pretty well.
Student Loans Are Necessary Evils for the Good Ahead
Nobody looks at their student loans during the start of the repayment plan and thinks good thoughts. It’s too easy to remember the times you had to make $20 last for a week and a half in the dorm room. But the trade-off is a more marketable career, time and time again.
Don’t let student loans intimidate you. You’re worth the investment. Now it’s your turn. What are some strategies that you’re using to reduce the amount of debt and/or repay? Sound off in the comments section below.
[Featured Image by The College Investor]