The appeal of student loans is easy to see: they offer a means to pay for an education that promises a good career with decent pay for the student who earns a degree. The loans tend to be easily available to young people entering university, community college, or technical school, and the interest rates are generally reasonable. Even better, they begin as obligations that have no payments due for many months or years.
For many aspiring students student loans appear to be the only path to achieving the education that seems out of reach otherwise. With tuition rising, additional expenses like books and class fees a constant consideration, and the reality of supporting oneself while learning with costs of rent, food, transportation, clothing, and more all piled on top of the expense of getting into school, the reality of getting started without some sort of financial aid seems unlikely.
Not only are loans for students usually available for young people with little or no credit history, but also the interest rates are generally competitive with other types of major consumer financing like car loans or a home mortgage. Used wisely and carefully, loans can supplement a student’s income through college and help defray some of the substantial costs of getting a higher education.
The deferred payments throughout the time in school usually mean that the student is able to build good credit ratings while not having substantial monthly debt payments. As long as payments start shortly after completion of the education and kept current, the student loan is usually a good start on a life of using credit wisely for substantial purchases such as a home or car.
Because of how easy it can be to get, student loan money can seem almost free to some young people. Detached from the need for current payment and distracted with the busy life of a student, there are people who begin to develop unsustainable attitudes about debt. Building upon the similar rationale that led to the loans for school, some young people will be tempted by credit applications in the mail and in stores, and may quickly build uncomfortable levels of debt that can be a serious burden on the future. Even if the student takes only student loan money as their sole debt during school, but takes on the maximum amount allowed and uses funds for living expenses or other things, they may find themselves excessively in debt soon after graduation.
Student loan debt is exceptionally difficult, if not impossible, to discharge in bankruptcy, and the collections are very aggressive. People who give little thought to the consequences of failing to pay the amounts due after they leave school often find themselves in serious financial trouble. An individual’s debt rating will plummet if payments are missed, making it difficult to rent a home, much less buy one. Employers often check credit ratings, as well, so that a default on a student loan will impact on the chance to get a good job, which was the reason for the student loans in the first place.
While student loans have a valuable place in society, they are potentially dangerous if used unwisely. Students considering going into debt for an education should weigh all the options very carefully. It is worth some time to look forward into the future and consider how much the easy money of a student loan will cost over the years after graduation, and how likely the future job with good pay will be to cover the debt and future living expenses.