It is possible to further your education by taking out a student loan. Sometimes, it can be a more affordable option than paying your way through college, but certain obligations are involved.
The pros and cons of student loans are similar to those of other types of loans. Consider these pros and cons before deciding whether to take out a student loan to finance your education.
This article will discuss some essential advantages and disadvantages of student loans and how to eliminate student loan debt.
Let’s get started.
The pros of student loans
Taking out a student loan can help you improve your credit score
Obtaining a student loan is the best way to build credit since it creates a long-term relationship between you and your lender. Lenders are more likely to consider you for a loan if they keep track of your payment history for an extended period. In the future, they will consider this precedent when determining how much money they can lend you.
It is considered a positive account when your lender reports your payments to the credit bureaus. Once you have established a positive history, it will help you to improve your overall credit score. If someone checks your credit score or pulls it, you will be better off if you have more positive accounts on file with the credit bureaus.
Having a student loan on your credit report also diversifies your credit mix or the types of debt you manage simultaneously. In the eyes of most lenders, working with several types of credit simultaneously is more impressive and indicates that you are an excellent borrower.
Other expenses can also be paid with student loans
Student loans can be used for more than just school tuition. You can use the loans to cover living expenses to concentrate on your studies. Using your student loan to pay for food, rent, mortgage, gasoline, transportation costs, a laptop, or computer equipment is possible. Even more, options are available if you have a Perkins or Stafford loan.
In addition to paying for school and housing expenses, you may use your student loan for other purposes. If you have ever asked yourself, “Can I pay someone to do my homework for me?” the answer is yes. Keeping up with your studies will increase the value of your student loans, so you should consider using your loan funds in this manner.
You may be eligible for a government subsidy
The government has created a Public Service Loan Forgiveness program to assist those struggling with their student loans. If you are eligible for PSLF but have yet to apply, we recommend that you do so as soon as possible, as there is no guarantee that it will continue.
Under the program, those who hold specific jobs may be eligible to have their remaining student loans forgiven. To receive a student loan repayment, you must have received a federal student loan while attending college. Furthermore, it would help if you were employed by a government agency and have made payments for at least ten years.
The repayment options for student loans are favorable
Typically, student loan borrowers have 20 years to repay their loans. As a result of the repayment period, you can make monthly payments that are manageable for your budget to repay your loan. Consider refinancing it with a private lender who can offer you better terms.
If necessary, you may extend your repayment period or switch to an income-driven repayment plan. If you choose one of these options, you can make smaller payments over a more extended period without accruing as much interest. Thus, student loans offer the benefit of deferring payments until you can earn a living.
The cons of student loans
Paying off student loans takes a long time
Student loans have the disadvantage of taking a long time to repay. In particular, this is true if you have many student loans. If you take a long time to repay your loans, you will accrue more interest over time. Over time, a high-interest rate on your student loan can add up. Defaulting on them or not making timely payments can negatively affect your credit score.
If you owe a student loan, you may have limited career options
Many students need to consider how much debt they will incur once they graduate. This may be fine for you if you plan to enter a field with a high graduate demand.
In contrast, if you are still determining which field of study best suits your future career goals, taking out student loans could prove to be a costly mistake. It is essential for students who plan to attend college to consider whether their degree program will prepare them for employment upon graduation.
Get rid of your student loan debt
Undoubtedly, student loans are valuable financial aid for students who wish to finance their college education. Borrowing student loans, however, has some disadvantages. Before taking out a loan to pay for school, consider all possible options.
These seven tips will help you eliminate student loan debt and move on with your life:
- Find out if you are eligible for student loan forgiveness.
- Utilize income-driven repayment plans.
- Low-rate student loan refinancing.
- Get rid of multiple student loans by consolidating them.
- Paying extra will reduce the principal.
- There may be an option for forbearance or deferment.
- Make a bankruptcy declaration.
You can settle your student loan debt by paying it off
Sometimes, you can settle your traditional student loan with the Department of Education. However, you will need to jump through several hoops. You may negotiate a settlement with the Department of Education to stop the collection of student loans.
It is only possible for some people to qualify for a settlement. You will likely have to prove that you are experiencing undue financial hardship and cannot repay through traditional means.
Make sure you have the money available to settle your student loans if you intend to do so. Students often owe tens of thousands of dollars on student loans. You may still owe $10,000 or more even if you reduce the balance of your loans by half.
A settlement arrangement usually involves a lump-sum payment to erase the remaining records. You can only settle your case if you have sufficient funds.
- Decide whether you wish to settle with a lump sum or monthly payments.
- Determine how much you can afford to repay.
- Make an offer to the debt collectors.
- Negotiate a settlement.
- Be sure to get a written debt settlement agreement.