Student loans have an overwhelming advantage: if money is limited, student loans enable you to go to school and get the diploma you need to make your career progress. But risks also arise when a student loan is taken, some apparent, some less apparent. The most real threat is that you won’t finish the degree program you ‘re taking the credit line for, and then you decide to leave school without showing anything except some disconcertingly large debts. An even worse risk, entirely understandable, is that you take the loan, complete the degree program, but then have a degree that is not commercially successful, that doesn’t get you the type of work you want, and that doesn’t increase your remuneration enough to compensate the debt you now have to pay off.
The way of reducing both of these risks is to do your homework before participating in a degree program, ensuring that students attending the program have a good success rate in actually completing it, and also ensuring that students who complete it have better job prospects at the end. According to a recent study the tuition fees in certain universities can alone cost anywhere around $51,000.Remember that lodging, food , transportation and other housing expenses are not included in those numbers. So your college loans might also have to cover living expenses if being a full-time student prevents you from grabbing the kind of job that would normally allow you to cover them.
Consequently, if student loan debt may be an issue for you, choosing a school with low tuition costs is best and helps you to live in a neighbourhood where the cost of living is low. Even with taking a student loan comes less apparent risks. There’s an old proverb that says “the debtor is the lender’s slave.” Debt will transform you into a banks slave that loans your student loan. Many students taking out loans for education are inexperienced and have never had any major debts. Taking a student loan changes all that every month, removing a sizeable chunk from your pay check once you have to start paying off the loan.
The average student loan in the United States, across all age groups, is now (in 2014) around $25,000 and that number is increasing. The average student loan for the 2013 graduating American students is over $35,000 (ref). That’s not really a home mortgage, but it’s nevertheless a sizeable debt. The impressive sounding word “non-dischargeable” is another less obvious risk you face in taking out a college loan. Let’s say you’re overwhelmed by debt. One way out of this is to claim personal insolvency, which nullifies the debts. But a non-dischargeable debt is one you will never ever get rid of, not by filing bankruptcy, not by doing anything but to pay it off or to drop dead (literally).
The fine print on student loans commits you to pay back the debts irrespective of the hardships that you face in life. Student loans are financially unsustainable. Users can’t rid themselves of those debts. They’ll follow you all the way through your life till the time you pay them off.
It is worth stepping back and asking why student loans have become such a major issue for students and a concern. Believe it or not, back in the 1960s, students were not unusual to work during the summer and earn enough to cover a large proportion of their school expenses during the year. Much of this shifted with the 1965 Higher Education Act (re-authorized many times since). By permitting students to take out massive loans, they encouraged schools to raise their tuition rates (after all, students could now pay for the increase). This led to a negative spiral in which schools continued to raise their prices and the government continued to raise the amount of money it would lend to the students.
You want to consider taking out a student loan very meticulously. Please ensure the expected return on schooling, and the degree the loan is supposed to secure is large enough. Not only does it need to cover the debt but it also needs to improve your career and life considerably. You buy an education by taking out a student loan. Make sure that you do get a good deal.