Many students feel that a federal or private student loan will be necessary to help them meet their college tuition payments once they have exhausted all of their scholarship and grant opportunities, as some students will typically apply for federal aid and a few popular or choice scholarships but leave their free financial aid searches at that. Yet, students are being prompted, particularly since there are some universities increasing the cost of attendance, to continue to press forward when it comes to looking for scholarships as there are some forms of financial aid, like institutional scholarship opportunities or financial aid specifically for certain majors that may be helpful and allow students to avoid borrowing during their academic career.
However, some feel that borrowing will be inevitable due to the fact that they are either attending a school where the cost is simply too high for scholarship and grant funds, coupled with out-of-pocket payments, to be useful and when this situation arises, students often begin exploring federal or private loans. Yet, students are well aware of the problems which may arise when student loan debt is acquired, particularly in cases where students have acquired a high amount of debt during their college career, but there are some who are questioning whether there are any benefits to student loans after graduation.
Students may know of options like forgiveness and student loan forbearance on federal loans, as well as consolidation options that may be available and come at a low rate. Yet, with student loan rates averaging around 4% to 6.8% or more, depending on whether a student opts for a federal or private loan, there are those who feel that it will be affordable to repay these debts even if multiple loans or one lump sum is borrowed to meet college costs.
One advantage of a student loan is, obviously, they do help meet college costs and in some cases earning a degree can usher a student into a career where their salary will easily allow them to repay what they have borrowed. Also, some students have found that by only borrowing a small amount of student loan debt, they can more easily pay off what they owe and this can be a positive item on their credit history, particularly early in their financial life where there may be little credit activity to show.
Yet, simply earning a degree and benefits to a borrower’s credit score are not enough to necessarily warrant borrowing a great deal of student loans, or there may be some cases where a student should avoid borrowing at all costs. Federal loans can offer forgiveness after 10 years of repayment for those in a public service career, and there are also some federal employment opportunities that will help repay student loans debt, but private loans, which are usually suggested as a last case option for some, have been advertising similar benefits like forgiveness if payments are kept current for a set period of time.
What needs to be understood though, students who acquired debt have been doing so in an amount that is not comparable to what they may earn in their career after graduation. While it is true that federal loans do offer more repayment options, more affordability in some cases, and the opportunity to have a percentage of the loan discharged, even a private loan may be a good choice for some students if they know that the occupation they plan to enter after graduation will give them the income to quickly remove these debts from their lives.
This is where, no matter what type of loan a student chooses, officials feel students must research their potential earnings after graduation and, in the majority of cases, they will want to avoid borrowing more throughout the entirety of their career than they may potentially make in the first year of employment. While this might seem conservative for some, with today’s job market bringing a great deal of uncertainty, student loans that are acquired in an excessive amount to help obtain a degree are going to be more of a burden to students who graduate college and are unable to find a job that will allow them to meet their repayment obligations or, in cases where no job can be found, a student may run the risk of missing payments or defaulting and this can be a great financial hindrance early in life.