Things to consider when taking out student loans.
It seems as though ages have passed since the time when getting an education required little more than grit and determination. Nowadays, going to get an education requires a lot more attentive care, especially when it comes to student loans. They may help you get access to various kinds of institutions and supplies, but they’re still a business. And business is boomin’.
In 2021, student loan debt topped approx. $1.7 trillion between 45 million borrowers, with the average amount of debt held by these borrowers sitting at $37,693. And while there may be occasional pauses in repayment from time to time, as there was during 2020 and 2021, the signs point to efforts to get borrowers to repay those loans. So if you think you need to apply for student loans, it’s important to gather as much information as possible before you make a final decision. And not just on what kind of lender you want to look into, but your situation as well; what kind of job you want, salary expectations, potential economic realities, all vital information to be cognizant of before you apply.
Kinds of student loans
There are two main types of student loans: federal and private.
What type of loan you should apply for depends on things like your credit history, how many years you’ll be in school, your financial needs, and employment status. Keeping these things in mind will narrow down one over the other.
Federal student loans, on the one hand, are issued by the federal government and tend to be more flexible. Congress sets interest rates every year, and to apply you need to fill out the Free Application for Federal Student Aid, aka FAFSA.
Meanwhile, private loans are issued through banks, credit unions, and state-based or state-affiliated organizations. Interest rates can be fixed or variable depending on the organization, and as such, they may be higher or lower than federal interest rates.
What you should keep in mind is that both types have their advantages and disadvantages depending on your needs. And there are a lot of considerations you should take into account.
Some ideas to point you in the right direction:
- All things college: Knowing what you want to do is great, but some options are more expensive than others. Tuition, housing, supplies, meals; these things really add up. More expensive schools, therefore, would require more loans to take out. Knowing how much it could all cost you is valuable information.
- Other financial sources: In addition to what schools you want to attend, it’s also important to note the scholarships you may be entitled to receive. Larger scholarships would mean that you don’t have to take out a high student loan, or at all, depending on the strength of your grades.
- Repayment plans and employment: Tomorrow always seems far away, but it’ll still sneak up on you. If you take out student loans, you’ll have to pay them back, so it’s important to be aware of your intended job market, the economic status of your industry, salary expectations, etc.
- Unexpected events: If your parent(s) or guardians co-signed your student loans with you, there’s a chance they could be on the hook for paying those back should anything happen. If you were to die, for example, the repayment expectations would fall onto your co-signers. Of course, you can’t predict your own death, but it’s something to think about when taking out loans, or having co-signers.
Life insurance and student loans
As stated, if you have co-signers on your student loans, and you die before tackling that debt, there’s a chance that your co-signers will inherit that bill in your absence. And with the rising amount of student loan debt, this can be a hard burden for most people to suddenly take on. Which is why having a life insurance policy is a financially viable option, even if you’re young and fresh out of college.
Should something happen to you, knowing that your life insurance policy can help tackle, or even wipe out, student loan debt is an enormous weight that can be lifted.
Like we said above, tomorrow always seems far away until it’s suddenly here. Life insurance policies are about not taking tomorrow for granted, and preparing for the things we cannot easily predict. Education is important, but knowing is only half the battle.
