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Students: Don’t Be Afraid of Student Loans!

As college costs continue to rise, many students are looking for additional ways to make ends meet, ways that don’t require picking up another part-time job or using credit cards. Coping with rising tuition costs and finding affordable living arrangements can be challenging in many college towns. Textbooks are always outrageously expensive.

Even the amount of time it takes to graduate has been increasing. Many engineering degrees for example routinely take five years to complete instead of the traditional four, tacking on another year of tuition and expenses. Despite these rising costs, many students still expect themselves to graduate without any debt. For some reason, they only think of student loans as debt, and they have no qualms about racking up massive credit card debt. This is both a dangerous and backwards notion.

Student loans are an option that many students dismiss while trying to graduate debt-free because they don’t differentiate between different types of debt. I’m not going to say that finishing college free of debt is a bad thing, It’s overrated and starting to become less feasible.

Luckily while in college you are in one of the best times in your life to take on debt. Not because you are going to be graduating and instantly making six-figures (a dream best to get rid of now), but because you will be able to do what it takes to pay off the debt. As an undergrad you are in an ideal situation to carry some debt because you have zero dependents to support, no mortgage, few monthly payments, and minor living expenses. You also have more mobility to find a good job when you graduate.

The news is full of stories about people that get in over their heads with credit card debt and then get eaten alive by the interest rates. You don’t really hear about people becoming overwhelmed by student loans. As it stands, being in your twenties with a college degree makes it very unlikely that you will fall beneath the poverty line.

Debt is an important part of modern finances; it’s how you build a reputation with financial institutions so that when you need the really big loans you already have a good history. Your game plan shouldn’t be to avoid all debt like the plague. It should be to become aware of different kinds of loans and debt. It’s easy to avoid getting in over your head with debt; all you have to do is use your head!

Many of us were taught we should avoid debt entirely, we never learned to distinguish between “good” debt and “bad” debt. Good debt provides opportunities to build credit, while bad debt leaves you buried. Think of student loans as bicycle training wheels for the banking world; they have incredibly low interest rates and a lot of nice perks that help make repayment easy.

For most student loans, repayment doesn’t start until 6 months after you graduate, giving you time to find a job and begin to save. They can be deferred if you go to graduate school and they feature different repayment plans, including plans that adjust to your income.

If you plan to become a teacher or serve in the Peace Corps, there are special repayment programs to help you repay your loans. A student loan can be a strong feature on your credit report and help bring up your credit score. With low monthly payments you can setup automatic payments to easily build up a strong history of repayment, something banks love. Student loans do all this while also helping to take off some of the financial stress that has been distracting you from the reason you came to school in the first place, to learn!

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