If you are living in the US and considering getting further education in a university then you are facing a difficult decision that will effect the rest of your life. On the one hand attending a university will in theory improve your prospects and lead to a higher paid job and a brighter financial future, it also offers great life experience and many people will say that the best years of their life were while studying and having fun at University. On the other hand though it also means several more years without earning any income toward getting on the property market, and it means taking out a huge loan that could leave you in a lot of debt. So is it worth taking out student loans and putting off the ‘real world’? Is it a smart financial decision?
When you take out student loans this normally means taking out a lot of money. Unless you come from a wealthy family then you will struggle to pay the college tuition fees as well as the living costs that attending a university or college involve. This then of course means that college students will graduate to inherit debt of $20,000 or more.
On the other hand however this debt can vary depending on your choices. First of all, public colleges will always charge a lot less than private colleges. At the same time a student who excels in academia or sports may be able to get a grant to help them through their education with much smaller student loans.
What can also vary is the loan itself and the terms involved. Federal student loans are made directly to students or to parents. Federal loans for students will not require payments as long as the student remains in at least half time education. There are then several situations in which students can get discharges against their student loans – in the case of disability for instance or for teachers and health professionals working in low-income locations. For parents repayments begin immediately, but the limit is much higher meaning more can be taken out (which in turn means access to education for more people). Private student loans meanwhile tend to have higher limits with no payment until post-graduation, though interest accrues immediately. Of course rates will vary with private loans and it’s important to shop around as ever.
How smart you are in choosing your student loans then will help you to minimize your debt or otherwise. In most cases you will still always have a large amount of debt to pay upon leaving but this needs to measured against the fact that graduates holding a batchelor’s degree earn 30-40% more income than those with just a high school diploma. Meanwhile this gap is increasing meaning that the difference will likely be even greater by the time you have completed a four year course.
Obviously whether or not that 30-40% applies to you depends partly on your chosen industry, and this does not take into account the head start that those who go straight into employment get. However it is fair to say that it is certainly not a straightforward financial decision and that the student loans and debt should not necessarily put off those seeking higher education. It depends a lot on your individual goals and ambitions – and you can’t put a price on life experience.