A quick riddle for everybody: Your friends have this, your relatives have this, and chances are your parents may have had this, and the government recommends this. What is this? a student loan. Is it a student loan good or bad? That is not for me to decide for you, all I can do is influence your decision by listing the advantages and disadvantages of common student loan facts.
I hate articles where you read an advantage of something and you find yourself scratching your head wondering why it’s an advantage. For this article I will list a statement and then provide you with both sides of the coin so that you are able to determine what is the best option for you. You may decide that a student loan is ideal for you or you may see things differently and come to the conclusion that you will not acquire a student loan to fund your college education.
1. With a student loan you will not have to stress about finding work.
Advantage: If you are truly a focused student and you will spend every moment of your spare time on your studies then a student loan is ideal for you. This way you will not have to lose any unnecessary study time to a job that will only hinder your ability to gain an A average.
Disadvantage: If you get distracted easily then you will probably spend most of your time on Facebook or playing pool at the school lounge. By attaining a student loan you will end up becoming too comfortable with having no work and as a result your time will not be spent effectively.
2. Student loans are fairly easy to attain.
Advantage: You won’t have to put up with the hassle of being interviewed and questioned in regards to why you need the financial assistance. This way you will not have to worry about losing sleep worrying about how you will cover the costs of a post secondary education. Many times students end up not even pursuing a post secondary education simply because they don’t have the many to cover the large expenses. By being able to obtain the proper tuition assistance, every young person has the opportunity to pursue a college education.
Disadvantage: With a student loan being easy to obtain you may end up receiving more financial assistance than required. Let’s be honest, this “extra” money will not go towards tutoring or education, it will be treated as your spending money. I have seen this happen many times to people around me where they attain more financial assistance than required and they end up buying a car or some other unnecessary purchase.
3. Most student loan repayment plans do not begin until 6 months after graduation.
Advantage: This gives you the proper buffer zone so you will not have to be in a position where you complete college and you are immediately drowning in debt.
Disadvantage: In this economy 6 months will most likely not be enough time for you to find that perfect first job where you will excel and grow your career. There is a good chance that you will get hit with the loan repayment and interest charges at a time where you are still on the job hunt. As a result of this you will find work in a field that is not ideal and may end up working a dead end job just to pay your bills. You don’t want to spend four years of your life working hard to get a degree only to end up working a job you hate.
Now the choice is up to you. Read over the various statements about student loans and their positive/negative implications to decide whether a student loan is for you or if you plan on doing things the old fashioned way by working a part time job.
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Definitely agree with the pros and cons both directions. I personally had student loans and just finished paying them off in December, a solid 5 years after I graduated. The bummer is my degree is in a field I’m no longer really working in, yet I was still paying for it.
I know a family friend who is a successful lawyer in our city in his upper 50s and STILL has student loans from law school! That’s insane. I encourage students to do everything necessary to avoid student loans.
Studenomics, good job on covering both the pros and cons of student loans. Too many people make the assumption that student loans are both necessary and helpful, and thus tend to whitewash the negative features. Good to see a more balanced approach.
@ Susie – It sounds like you have an interesting plan, but one thing to note: there are two different types of student loans, with the interest treated differently. Subsidized loans have the interest paid by the federal government while you’re in school; unsubsidized loans do not (the interest accrues while you are getting your education and is added to the loan total). Depending on the exact mix of loans you are able to get and type of investments you make, investing an amount of money equal to loan principle when you start your education may, or may not, grow enough to completely repay the loans by the time you graduate. Starting with more money to be put aside will allow you do so, but you should be sure to run the numbers first, so you know how much to set aside.
This article is so important right now in England!
I don’t know how the student loans in Canada and the US are calculated by in England the rate of borrowing goes in line with RPI. Due to recent cuts in the Bank of England base rate this RPI is droppping fast and may soon be in the negatives. What does this mean? In theory the treasury could be paying back interest on the loans. My sister is in this category as she will start paying back in April of this year when the RPI is predicted to be dropping to as low as 0.8 %!