Depending on the situation you find yourself in after graduation, student debt can be both a benefit and a curse. On the one hand, they give you the option to spend money on a college education and raise your chances of securing a steady, well-paying job. On the other hand, they can leave you with a heavy burden of debt that may not be manageable.
In this article, we’ll discuss the benefits and potential disadvantages of student loan debt and help you understand if it’s a good investment for your life or not. So, stay tuned to learn more.
The Difference between Good and Bad Debt
A good debt is borrowing money for something that will appreciate in value over time. This can include mortgages,
small business loans, or other investments. In contrast, bad debt is borrowing money to pay for something that
decreases in value, such as an auto loan or a credit card debt with high-interest rates.
Student Loans – A step into burning fire or soothing waters
Student loans fall in a gray area between good and bad debt. On one hand, a college degree can significantly
increase your earning potential compared to those without one. According to a Student Loan Hero survey, college
graduates earn more than those with less education.
However, student loan debt can also be bad as there are no guarantees of employment after graduation. With
student loan debt topping $1.64 trillion and over 45 million borrowers, it can be difficult to repay this debt,
especially during tough economic times.
Merits of Student Loans
Student loans provide an opportunity to invest in your education and future career. You can attend college without
paying the full tuition upfront and increase your chances of finding a well-paying job. Additionally, federal student loans come with lower interest rates compared to other loan products and offer tax-deductible interest. Federal student loans also come with a variety of repayment plans, allowing you to align your loan payments with your budget.
Demerits of Student Loans
Even with a college degree, you may still face unemployment after graduation. Furthermore, entry-level workers
may not earn enough to afford their loan payments. Unaffordable student loan debt can lead to default and
damage your credit score, making it difficult for you to be approved for other types of credit. The high value of
student loan debt compared to a lower salary can also result in a distorted debt-to-income ratio, damaging your
credit even further.
Alternatives To Student Loan
Knowing the good and bad about student loans, you may be wondering “what’s the alternative? Well, all hope is
not lost because there are a few options you can pursue. Below are a few:
1. Scholarships
Scholarships come in different forms and are awarded by governments, individuals and Universities to help mostly
needy but brilliant students climb up the academic ladder. If you have great academic results and have volunteer
hours, you may be the ideal candidate for a full scholarship or partial scholarship.
Begin your search on the institution you wish to study in and find out if they have scholarship opportunities and
what the requirements are. You can then start the application process and hope you get picked. The internet is full
of resources for available scholarships.
2. Family and Friends
Family and friends may be willing to support your education if only they have the means and you ask. Check with
some of your relatives and friends who are employed and doing well and let them know you need help, some may
be willing to support you without requiring you to pay back, or give you soft loans with little to no interest.
Conclusion
Depending on your unique situation, student loans can be a good or terrible investment. While a college degree may boost your earning potential, employment is not a given. It’s crucial to thoroughly assess your future employment prospects, possible income, and capacity to repay the debt before taking out a student loan. Student loans might be a big help if you are optimistic about your future. But if you’re hesitant, it might be a good idea to think twice or look into other possibilities.