Is it Worth Taking Out a Student Loan?

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Student Loan

Student Loan

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.

 

Posted by admin   @   9 June 2011 13 comments
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13 Comments

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Jun 9, 2011
2:36 pm
#1 Kevin :

It is very wise to look into grants. I went back to school and could not have afforded the high costs with out it. It may take some time to find ones you qualify for but trust me. They are well worth the time spent to find one.

Jun 18, 2011
9:51 pm
#2 Whinny :

I agree much with looking into grants for college. Or see about getting some other financial aid. It is hard to repay that much debt. You will want to buy a house after your graduate and start a family and with this debt that may be hard to do.

Jun 19, 2011
2:11 am
#3 Jew :

I would not go that far. Taking out a student loan is not a good idea. At least not in my case. I prefer to work for that money. Or work for a part of the money if the other part could be taken care by my parents.

Jun 27, 2011
8:03 am
#4 Kris :

Taking out a student loan is usually worth it. Of course, this happens when you really want to study during college. In case you want to be a mintrubber, taking out a student loan is useless. As long as you know that you can pay the money back (because you will get a well paid job), it’s okay.

Jun 30, 2011
4:38 pm
#5 Tyler Thomas :

I was lucky and did not have to take out a student loan. My parents saved me money since I was a child. I had many savings bonds to use as well. I highly suggest not taking out a student loan.

Jun 30, 2011
5:01 pm
#6 Paul :

I have taken out a student loan. It was not really for a lot but I could not imagine having to take a large one out. Like if you went to graduate school or something. That debt would be massive.

Jul 10, 2011
10:42 am
#7 Randomil :

In my opinion taking a student loan it’s a good investment. I’m saying this because doing a college is better for your future. After you graduate you have more chances to take a well paid job.
If you cannot afford going to a college, then a student loan is the single way to do it. So, yes, I agree with taking a student loan.

Jul 10, 2011
11:04 am
#8 Xania :

I don’t agree with taking a student loan. If you cannot afford going to a college how can you afford paying the student loan after? You must get a job, no? Studying and working, in my opinion, it’s hard to do both of them at the same time. I know that is important to go to a college, but I don’t agree with taking a student loan in no case.

Jul 17, 2011
10:44 pm
#9 Gabriel :

It depends on the college. You never know if is it worth taking out a student loan. Only after you manage to get a job or when you realise that you have been unemployed for quite a while. And some colleges simply do not offer a wide area of job choice after graduation. For instance, usually, an engineer definitely has more chances to get a job after graduating.

Jul 17, 2011
11:10 pm
#10 Ramon :

I know someone who went for taking out a student loan. He was one of the guys that said it’s worth it. He went for law or something. Anyway, he got a job right after his graduation. The salary was high enough to pay the student loan back in less time than required.

Sep 10, 2011
7:24 pm
#11 Shaen :

I did not take out a student loan. Instead my parents saved for it. And when I got a job half went into savings. That is how I paid for college.

Nov 6, 2011
1:58 pm
#12 Poll :

I think that taking a student loan is worth. It’s like you invest in yourself. After you graduate you have much more possibilities to get a well paid job. And with this job you can pay back that student loan. And after you finish with the loan you have enough money for yourself.

Nov 6, 2011
4:28 pm
#13 R3 :

It’s ok taking student loans. I know the story…you take a better job etc. But what happens with those people who cannot take that job? With what money they will pay back that student loan? Maybe they don’t have that change to get a better job. What will they do?

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