Scared to Obtain a Student Loan: Reasons to Consider Them and Tips to Making it Affordable

There is no doubt about it, when you bring up the topic of student loans; you’re going to get a lot of individuals that cringe. Let’s face it, in today’s economy; student loans have gotten a pretty bad rap. However, the truth of the matter is that student loans can be beneficial and have helped millions of individuals afford a higher education and college degree. The problem only arises when you plan to fail. As such, we’re going to talk a bit about the various reasons to obtain a student loan and also tips to making it affordable.

The Upside to Taking Out a Student Loan

Sure, we’d all love the ability to be able to pay for school out of our own pockets or even better, go to school on a full ride scholarship or financial aid grant, but that’s just not reality. With universities charging tens of thousands of dollars each year for and education, there is really no way we can all compensate for those expenses. As a result, we end up looking to other means to fund our college education, and after all other options have been dissolved, the next best solution is to finance it. Now to counteract all the negativity out there about student loans and the debt they cause, let’s go over some reasons why it pays to finance your education:

• Fund Your Education Now, Pay Later – One of the first advantages to obtaining a student loan is the obvious advantage of being able to afford school now and pay for it later on. Imagine if student loans weren’t available, then we’d be stuck trying to figure out how to pay out of pocket. While most schools have payment plans, they often want a significant deposit and large periodic payments.
• One Step Closer to Your Dream Career – Whether you want to be a teacher, doctor, lawyer, or business owner, having a solid educational background is the best way to get your foot through the door. Therefore, obtaining a student loan to fund your education puts you one step closer to accomplishing those dreams.
• Builds Your Credit – Here’s a benefit that is often overlooked; the chance to develop some credit. Student loans can do wonders for your credit history, especially for those who have none. It shows lenders that you can be entrusted with thousands of dollars and repay in a timely fashion. (Of course this only works if you actually pay on your student loans as agreed.)

Effective Planning Minimizes the Potential for Failure

Alright, so now you know why student loans are beneficial to college bound students, let’s dig into the planning process. Many students make the mistake of simply accepting whichever offer they can get approved for without ever having done the research. If you have a plan in place before ever applying for a student loan, you can often eliminate a lot of the debt issues you hear discussed, and can go to college for an affordable rate. Below are some suggestions on how you should plan ahead:

• Consider the School – It might sound great to attend an Ivy League school or a very popular university, however, be careful that you’re not paying extra for the name. For example, an Air Jordan can run you about $300 while a Nike sneaker could cost $100. They both serve the same purpose, so what’s the point in gutting out on a Jordan when you could pocket $200 and get a Nike sneaker. The same holds true for schools. When looking into various universities, be sure to review the overall costs, and the ratings it receives for quality education. You can get a decent education at a community college or a “no name” college as you can from an Ivy League school. By doing this you can cut your costs by thousands of dollars.
• Compare Lenders – A student loan comparison points out that the best way to get an affordable student loan is to compare the lenders and rates. While two banks might be willing to offer you the same amount for a student loan, one bank might have higher interest rates, or strict repayment requirements that make choosing the other lender a better option.
•  Repayment Options – Most federal student loans have repayment options that allow students to defer all payments for six months to a year after graduation. This gives you ample amount of time to find a job and begin making payments. If you’re struggling right after graduating college, there are also repayment options that allow you to completely suspend or defer payments to a later date or pay a more affordable monthly rate until you get on your feet.
• Start Setting Aside Funds Early – If you receive money from a part time job, work study opportunity, or internship (paid), the best thing you can do is begin putting aside money to repay your student loans. Even if you’re only able to save $30 a month, at the end of a four year degree program, you’ve got yourself a total of $1,080. While this may not seem like a lot, it is a significant dent in your loans and will give you a little wiggle room until you find employment.

At the end of the day, what it boils down to is being smart when financing your education. First, you want to completely dissolve all your other options for funding and then obtain a loan that is affordable that will present the least amount of debt upon graduation. Planning ahead prepares you for the common pitfalls of having a student loan and ensure that you can achieve your dreams without going into debt.

Have you ever had a student loan?