It’s no news that college can be quite expensive. Hence, student loans come in handy to enable millions of students to access college education easily. However, it is really important that you understand the pro and cons of these loans to help you make the right decisions as a student.<\/p>\n\n\n\n
According to Student Loan Hero, almost $1.3 trillion of the $1.44 trillion in outstanding U.S. student loan debt is held in the federal portfolio.<\/p>\n\n\n\n
Then, private student debt makes up the remaining $140 billion. This can sometimes be called alternative student loans. <\/p>\n\n\n\n
However, this type of debt also carries several pros and cons when compared to federal loans, as we will discuss in this post.<\/p>\n\n\n\n
Here, we will explore the advantages and disadvantages of student loans. <\/p>\n\n\n\n
A student loan is money that is borrowed to be paid back over time. In addition to repaying the amount borrowed, interest must also be paid.<\/p>\n\n\n\n
Most college students sometimes borrow one or more student loans before graduation because there aren\u2019t tuition grants to cover college costs. <\/p>\n\n\n\n
Sometimes, students have to get side jobs to cover tuition costs in schools and avoid owing the system. <\/p>\n\n\n\n
However, are you wondering if taking student loans is good or bad for you? Let’s dig in and see for ourselves.<\/p>\n\n\n\n
Students generally apply for three types of loans during their stay in college. They are:<\/p>\n\n\n\n
Now, you understand these student loans, let’s move ahead to evaluate their advantages and disadvantages.<\/p>\n\n\n\n
Before applying for any loan, you need to know how its benefits and disadvantages affect you as a student. <\/p>\n\n\n\n
Of course, student loans have a lot of advantages which we will list as follows:<\/p>\n\n\n\n
Firstly, acquiring a college degree is necessary to earn more in any environment, but the college costs can be quite expensive. <\/p>\n\n\n\n
Even when you lump in help from parents, it\u2019s a really small percentage of Americans that can afford college costs without taking out any student loans at all. <\/p>\n\n\n\n
For this reason, student loans are very vital to helping you achieve that degree of your choice.<\/p>\n\n\n\n
Yep, very true. Student loans help college students build their credit scores significantly. So, having an excellent credit score will come in handy throughout the rest of your life as you apply for apartments, look for credit cards, and even while applying for jobs. <\/p>\n\n\n\n
Hence, you must make sure you are using your student loan responsibly and always making your monthly payments.<\/p>\n\n\n\n
Just imagine that you applied to that Ivy League school of your choice and they accepted. But, your parents couldn’t afford to take care of those college expenses. <\/p>\n\n\n\n
Basically, if you didn\u2019t have access to student loans, you would be forced to go to the college that your savings could afford. But because student loans exist, you have the ability to choose which school you want to go to.<\/p>\n\n\n\n
The feeling of having a choice rather than just one option is really heartwarming.<\/p>\n\n\n\n
It’s also important to note the disadvantages of obtaining student loans.<\/p>\n\n\n\n
When you pick a student loan, you have to pay back with interest. This ranges anywhere from 4.45\u20137% for federal student loans (in 2018) to a high of 11\u201315% for private student loans. Hence, this is one of the major disadvantages of taking school loans.<\/p>\n\n\n\n
So, it’s important to accept federal student loans first, before turning to private student loans, because they are cheaper.<\/p>\n\n\n\n
It might look like your world is coming to an end when you can’t pay off your student loans. Also, you can’t declare bankruptcy to get rid of the loans taken. Just imagine having to service a mortgage loan while still paying off your student loan. This can really take a hit on your credit score. And a bad credit score can follow you throughout your life.<\/p>\n\n\n\n
So, this is one major disadvantage of taking a student loan while in college. That’s why it’s important to pick loans you can easily pay back after graduation.<\/p>\n\n\n\n
Honestly, if you rely on student loans to pay off college costs, your adult life starts out in debt. <\/p>\n\n\n\n
Truly, a college education might give you the chance to earn more money than someone with only a high school diploma.<\/p>\n\n\n\n
But, depending on your debt, you might have a hard time finding a job that pays enough money to allow you to live a decent life and repay the loans as well.<\/p>\n\n\n\n
If your back is against the wall and really there is nothing you can do to avoid dropping from college due to high cost, you can pick a student loan. <\/p>\n\n\n\n
By the way, you can also access several scholarships available for college students<\/a> to help. <\/p>\n\n\n\n In fact, knowing the advantages and disadvantages will keep you from making mistakes when picking a student loan. Not just that, it also helps you know the right loan that suits your repayment budget.<\/p>\n\n\n\n We all know that these government student loans are cheaper and easier to get than private student loans. But, is a federal student loan right for you? Let’s find out together.<\/p>\n\n\n\n Here are a few advantages of student loans provided by the government.<\/p>\n\n\n\n Federal loans are not credit-based. For this reason, you don’t really need a co-signer to be concerned with covering the loan payment in any case you can’t repay.<\/p>\n\n\n\n As opposed to private student loans that prefer to know that the student on the loan has experience borrowing and repaying with good credit history.<\/p>\n\n\n\n So, you don’t need a good credit score to determine what interest rate you’ll get.<\/p>\n\n\n\n When you qualify for a federal direct subsidized loan, the government pays the interest on the subsidized loans, while you are in school at least half the time or in your grace period.<\/p>\n\n\n\n So, this is advantageous for students with high financial needs because acquiring alternative student loans doesn’t have this option.<\/p>\n\n\n\n So, if you find yourself having multiple federal loans, you can easily consolidate student loans into one payment. You can easily do this without a credit check.<\/p>\n\n\n\n This consolidation would also make some of your loans eligible for Public service Loan Forgiveness and income-driven repayment plans. <\/p>\n\n\n\n In Federal loan forgiveness, loans are generally forgiven after 10 years, while working in a non-profit or for the government can also get your loans to be dissolved. <\/p>\n\n\n\n This option does not really appear in private loans.<\/p>\n\n\n\n Of course, there are limitations to getting federal student loans as we will discuss here.<\/p>\n\n\n\n While acquiring a federal loan might be cheap, there are financial needs that exceed the limits you can borrow and college students are forced to supplement these loans with other funding avenues like Private student loans which charge higher interest rates.<\/p>\n\n\n\n Also, those currently defaulting on any federal loan are automatically denied from applying for another. Well, until they get their loan to default status.<\/p>\n\n\n\n Federal Direct Loans can only be used at colleges that release Title IV student financial aids. <\/p>\n\n\n\n So, if you plan to go to a school that is not eligible for this category, you will have to find some other source of student loans to help you cover the college expenses.<\/p>\n\n\n\n That can be disadvantageous if your dream school is not eligible for that category and you plan to apply for federal loans.<\/p>\n\n\n\n This is bummer! As a graduate student, you are not eligible for some options available to undergraduates, such as a Direct Subsidized Loan.<\/p>\n\n\n\n Also, graduate students are charged a higher interest rate on their loans than undergraduates. According to Federal Student Aid<\/a>, the graduate-student rate for the 2022 school year was 6.08% compared to 4.53% for undergrads.<\/p>\n\n\n\n For this reason, it is a great idea to apply for scholarships available for graduate students.<\/a><\/p>\n\n\n\n Students who borrow and cannot repay their federal loans will also be unable to escape them when they declare bankruptcy. They may have a slim chance if they fall under “undue hardship,” but it is very difficult to qualify for that category.<\/p>\n\n\n\n Of course, should you choose to take a private student loan, let’s discuss its advantages and disadvantages.<\/p>\n\n\n\n There are always a few merits to applying for a student loan, as we will discuss here.<\/p>\n\n\n\n When federal loans set limits on how much to be borrowed, students with more significant financial needs can rely on private student loans to help them cover their tuition expenses. <\/p>\n\n\n\n So, these loans fill the gap when federal loan options have been exhausted.<\/p>\n\n\n\n Unlike federal loans, students can qualify to take higher loans with alternative loans. You can even borrow up to 100% of your cost of attendance with little or no restriction, depending on your degree level and credit history.<\/p>\n\n\n\n Hmmmph!<\/p>\n\n\n\n Because your credit score will take a bad hit, defaulting on a private student loan is rarely advisable. But, it is comforting to know that your student loan has an expiry date. Well, that’s if the worst happens.<\/p>\n\n\n\n However, the statute of limitations when you default may vary from 3 to 10 years. So, this can be very advantageous if you consider taking a private student loan.<\/p>\n\n\n\n Although the advantages of alternative student loans can be enticing, there are major drawbacks you should consider before making a decision.<\/p>\n\n\n\n Many financial institutions require you to provide a cosigner for you to take a student loan. So, you can’t just bring anyone to qualify to get a loan. <\/p>\n\n\n\n Your cosigner must meet the credit standards required to get the student loan.<\/p>\n\n\n\n Worse still, if you qualify without a cosigner, you still pay a higher interest rate than federal loans as a young college student with limited credit history. You then graduate from college neck-deep in debts you can barely repay.<\/p>\n\n\n\n As regards federal loans, loan defaulters can engage in income-driven repayment programs or are eligible for Public service Loan Forgiveness.<\/p>\n\n\n\n But defaulters are rarely lucky to find any student loan repayment assistance for private student loans. Hence, this can destroy their credit more quickly than in federal loans’ case.<\/p>\n\n\n\n Yo! Forget it. Private student loans are rarely subsidized. Also, in the case of an unsubsidized loan, you will be responsible for all the interest on your loan regardless of the loan status.<\/p>\n\n\n\n Unlike in federal loans, private student loans cannot be consolidated into a Direct Consolidation Loan. But, they can be refinanced with a private lender to give you a new interest rate.<\/p>\n\n\n\n You can apply for federal student loans as well as private student loans. You might need to provide a cosigner or a good credit score for private student loans. It solely depends on your financial needs. You can apply for federal loans first since they are cheaper, then supplement with private student loans if federal funding is insufficient.<\/p> <\/div> Of course, you can consolidate any student loans you acquire. It helps you reduce monthly payments significantly.<\/p> <\/div> Because your credit score will take a bad hit, it’s rarely advisable to discharge student loans in bankruptcy. But it is comforting to know that your student loan has an expiry date. Well, that’s if the worst happens.<\/p> <\/div> To get an\u00a0international student loan\u00a0program, a student must get a cosigner who is a US citizen or US permanent resident with a good credit score and who has lived in the US for the past two years. Certainly, student loans are like the superheroes that save you from that pool of college expenses. But, education on their pros and cons can help you make informed decisions before you take any loan.<\/p>\n\n\n\n Also, if you are in that tight spot and must take a student loan, apply for federal loans first and only use alternative student loans as your last resort.<\/p>\n\n\n\n Student Loan Hero<\/strong> – Statistics for 2023<\/a><\/p>\n\n\n\n Student Debt Warrior<\/a> – Pros and Cons of Student Loans<\/strong><\/p>\n\n\n\n Nerdwallet<\/a> – Government Student Loans: What Are the Benefits?<\/strong><\/p>\n\n\n\n Investopedia<\/a> – Disadvantages of Federal Direct Loans<\/strong><\/p>\n\n\n\n Does this article meet your immediate needs? If yes, kindly share it with your friends. Also, remember to leave a comment on the comment box to express your concern or ask a question. <\/p>\n","protected":false},"excerpt":{"rendered":"It’s no news that college can be quite expensive. Hence, student loans come in handy to enable millions…\n","protected":false},"author":12,"featured_media":122620,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,81],"tags":[159088,66341,133516,134102,132076],"yoast_head":"\nPros and Cons You should consider when Picking a Federal student Loan<\/strong><\/span><\/h2>\n\n\n\n
Pros of Federal Student loans<\/strong><\/span><\/h3>\n\n\n\n
#1<\/strong> You don’t need a cosigner to get this loan<\/strong> <\/span><\/h4>\n\n\n\n
#2 There is less interest on subsidized loans<\/strong><\/span><\/h4>\n\n\n\n
#3 You don’t need good credit to consolidate this student loan and also get it forgiven.<\/strong><\/span><\/h4>\n\n\n\n
Cons of Federal Student Loans<\/strong><\/span><\/h3>\n\n\n\n
#1 There is a Loan Limit<\/strong><\/span><\/h4>\n\n\n\n
#2 Not Available to all schools<\/strong><\/span><\/h4>\n\n\n\n
#3 Graduate Students are eligible for some favorable options in this loan<\/strong><\/span><\/h4>\n\n\n\n
#4 Inability to discharge in Bankruptcy<\/strong><\/span><\/h4>\n\n\n\n
Pros and Cons You should consider when Taking a Private Student Loan<\/strong><\/span><\/h2>\n\n\n\n
Pros of Taking a Private Student Loan<\/strong><\/span><\/h4>\n\n\n\n
#1 They fill the funding gap when needed<\/strong><\/span><\/h4>\n\n\n\n
#2 They have Higher Borrowing Limit<\/strong><\/span><\/h4>\n\n\n\n
#3 The Statute of Limitation<\/strong><\/span><\/h4>\n\n\n\n
Major Cons of taking private student Loans<\/strong><\/span><\/h2>\n\n\n\n
#1 You need a Co-signer to get one<\/strong><\/span><\/h4>\n\n\n\n
#2 There are little or no repayment or Forgiveness options<\/strong><\/span><\/h4>\n\n\n\n
#3 There are little or no subsidized student loans<\/strong><\/span><\/h4>\n\n\n\n
#4 Loans cannot be consolidated<\/strong><\/span><\/h4>\n\n\n\n
Frequently Asked Questions<\/strong><\/span><\/h2>\n\n\n\n
<\/p> <\/div> <\/div>\n\n\n\nConclusion<\/strong><\/span><\/h2>\n\n\n\n
References<\/strong><\/span><\/h2>\n\n\n\n
We Also Recommend<\/strong><\/span><\/h2>\n\n\n\n
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