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What are Students Loans, and Why You Should Be Careful

Education is one of the essential pillars of our careers and is one the key foundation of any economy and the county as a whole. However, it is expensive, and most people cannot afford the cost and expenses of obtaining higher education.

Student loans are an implication that you are paying to have an education. This means that you have to make sure that your career will be well-paying to be able to pay the loan. Which means you should choose a course with high demand in the market. And even though you might be required to write tough college papers, it will be worthwhile in the end. Better yet,
you can always seek college paper help from online tutors and educational writing platforms that will help you secure better grades. Thus, you will not be worried about landing a job which you will not manage to settle your debt.

Student Loans-Definition

So what are student loans for college? These could be termed “good debt” or an investment in education. This credit is offered to students to help them pay for post-secondary education as well as the associated fees. These Associated fees include, but not limited to, tuition, living expenses and books, and supplies. The interest rate is "considerably low." Reports released by Forbes in 2018 shows that more than 44.2 million Americans owe the government more than $1.52 trillion in student loans. This means that on average the money owed ranges from $3000 to $53,000 per person. This average debt per person has continued to increase, and it now stands at $38,390.

What you Should Know About Student Loans

Honestly, loans for college are the only credit where the lender continues to extend credit year after year without even inquiring about the person’ creditability and his/her ability or willingness to pay. These lenders are aware that student loans differ from other types of debt in the worst ways, but that does not stop them from their goal. But before you apply, it is essential to mention that you don’t have to borrow. It is also worth
mentioning that the more you borrow, the harder it will be to repay. Although life in college might be easier with the extra money, it can become a serious burden that will plague your life and is a lot trickier than they seem. With this in mind, here are some of the main reasons why you should be careful before apply for the student loan.

Why are Student Loans Dangerous?

High-Interest Rates

If you thought that the interest rates would be lower since there is a possibility that you will not start earning immediately, then you thought wrong. The interest rates on student loans can be ridiculously high and are much higher than on other types of loans. Let's take an example of the Federal loan. The federal loans’ interest rate ranges between 5% and 6%. On the other, some graduate loans fall just under 9 %.

It is worse in the case where you take up private student loans since the interest rate range between 2.5% and 12%. If we were to compare the maximum rate, 12% is three times higher than the rate of most mortgages. It also comes close to the rate of an average credit card.

Worse still, in recent times, federal student loans are capped with fixed rates. This means that you can only guess how much you will be paying. The rate also keeps on changing which means that the debt you take in your final year could have a higher interest rate than that you took in your fresh year. However, even though the federal student loans seem better than private loans, you should always keep in mind that the federal government is not doing you any special favors. It is only looking to make money off your debt!

Can’t File For Bankruptcy

Unlike other debts which can be written off when you file for bankruptcy, it will be extremely hard to be discharged in bankruptcy. It is also hard for the debt to be reduced or eliminated. The reason why this is hard is that the law is in itself complicated.

For instance, for a student loan to be eliminated, you will need to prove that paying the debt could cause ‘undue hardship’. However, bankruptcy law does not define ‘undue hardship.’ This means that the possibility of discharging your debt is subjective since it is up of the court to decide.

You Can’t Count on Student Loan Forgiveness Programs

Wondering if there is a way on how to get out of student loan debt? Yes. In the case where you decide not to file for bankruptcy, you can opt to negotiate for a temporary reduction in payments. But this is also not the best option since the loan usually grow larger while you pay smaller amounts or keep postponing the payments. In the case where you regain financial stability, your loan will have grown to an unmanageable level.

Although student loan forgiveness can save you some dollars, there are also some restrictions on the type of loans that can be forgiven. Currently, only Federal Family Education Loans and Federal Direct Loan can be forgiven. Your occupation can also determine if you are eligible for student loan forgiveness. These include public service jobs such as military service, early childhood education, law enforcement, and public safety, public school teaching and health care, among others.
However, even in these professions, the loan is not forgiven immediately, and you have to make 120 monthly payments while employed full-time. This does not make sense since a 120 monthly payment will add up to 10 years. Thus, this program does not help a young person while they need it the most.

They are Risky

Immediately after high school, you are told to apply for your dream school and don’t worry about the money. This financial aid is for sure helpful in making the college experience affordable. However, advising young people to naively send applications to private institutions whose tuition fee is as high as $ 60,000 is absurd. And the worst part is that they do not warn scholars about the potential consequences of loans for college students. A research carried out by American Institute of Certified Professional Accounts highlighted that more than 60% of all the learners who applied for the student credit did not know how hard paying back the debt would be, and most of them regret ever making the decision.

In conclusion, the decision to apply for student loans is personal, and no one should impose it on you. It is always advisable to weigh the risk and weigh if you will be capable of paying back the loan. Make sure that the degree and the education you are pursuing will offer returns that are enough to pay the debt. Taking a student debt means you are buying an education. Thus, make sure you are getting a great deal that will also improve your career.