At times, the student loan industry gets a lot of flak. With over forty million of us in student loan debt, I can see why that happens. It's not always the lender's fault. Tuition increases and lack of knowledge are some reasons why student loan debt is so high. Many people think student loans are bad and that you shouldn't take any out. Today, I want to go over a few reasons why a student should take out loans.
Knowledge is Power
I'm sure that you have heard the saying "Knowledge is power" hundreds of times. It's a very accurate statement. The more that you know, the more opportunities that you can get. Knowledge can be attained in college. The student loans are there to help you pay for it.
Loans might be the only aid that you have
In college, I had three types of financial aid to help me pay for my tuition. I received the Pell Grant every semester. I also received the Hope scholarship for three semesters.
The Hope is a scholarship that students who graduate from a Georgia high school with a 3.0 GPA can receive. As long as you maintain a 3.0, you can keep receiving that scholarship. I lost the Hope scholarship during my 2nd year in school. I should have done better in my classes because that money could have helped me out.
Finally, I had student loans. For some students, the only type of financial aid that they qualify for is student loans. If that's the case, there is nothing wrong with taking out loans. Make sure that you start with the federal loans first by filing the FAFSA before the deadline.
If they are not enough, then proceed to exhaust your private options. When you're looking for a private loan lender, make sure you review several companies. Compare the interest rates and all the fees.
You only have a couple of semesters left
If you're a junior or senior, and you're running short on scholarship or grant money, you should take out the student loans. You've come too far not to finish your studies. If you only have to take out student loans for your junior and senior school years, your debt will not be as high as other students who have had to use loans during their whole college career.
Federal loans have different repayment benefits including student loan reimbursement through your employer. But federal loans also have seven other different repayment plans such as the standard plan and multiple income-driven repayment options.
Standard Repayment Plan
The payments are a fixed amount. The plan can last for up to 10 years. (30 years if you consolidated your loans)
Graduated Repayment Plan
The payments are lower at first, and then they increase, usually every two years. The plan can last for up to 10 years. (30 years if you consolidated your loans)
Extended Repayment Plan
The payments are fixed or graduated. The plan can last for up to 25 years.
Revised Pay as You Earn Repayment Plan
Your monthly payments will be 10 percent of discretionary income. Your payments will be recalculated each year and are based on your updated income and family size. Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 or 25 years.
Pay as You Earn Repayment Plan
The maximum monthly payments will be 10 percent of your discretionary income. Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years.
Income-Based Repayment Plan
Your monthly payments will be 10 or 15 percent of your discretionary income. Your loans will be forgiven after 20 or 25 years if you have any outstanding balance left.
Income-Contingent Repayment Plan
Your monthly payment will be the lesser of 20% of discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. The outstanding balance will be forgiven after 25 years.
Income-Sensitive Repayment Plan
Your monthly payment is based on annual income. It lasts up to 15 years. If you are going through hard times, you should be able to defer or postpone your payments as well.
You have no other income
If you have no other income, you should take out student loans. From my experiences, I've seen that some doctorate and law students don't have a job while they are working on their respective degrees. They have to use some of the loan money to survive off of until they graduate. If you are a student that has to do that be smart with the amount that you have to take out,
College is your way out
Every student doesn't come from the perfect family or neighborhood. There aren't white picket fences or even a supporting family around some of them. Some students come from rough areas. They beat the odds and graduate from high school. College is the next step to get them out of that environment. Accepting those student loans will allow them to pay for college. Getting away from that environment is crucial for the continued success of those students.
As you've just read, there are several reasons why you should take out student loans. In these cases, it is worth it. Make sure that you have a plan to pay them off after you graduate.