Student loans have different profiles. On the one hand, they help students achieve a college degree. On the other hand, many people accumulate student loan debts that take years to pay off. So, is a student loan right for you?
Whether or not a student loan is suitable depends on your educational and financial needs. Are you committed to applying your knowledge to a fulfilling position? If you answered yes, the next thing is to look at your current finances.
What’s your debt to income ratio (DTI)? First, you need a student loan if you owe more than the amount in your bank account. Conversely, you may require partial help or none at all if you can afford a full-time college education.
Thoroughly examine your finances before submitting your first student loan request. Get a good idea of your current funds, and move on to the next step.
Student Loans fall under several categories. The most common is a government-based option from an organization like Sallie Mae. It’s the loan you apply for when you request assistance from the Free Application for Federal Student Aid (FAFSA).
The other option is a private student loan. The government sets interest rates for federal subsidized and unsubsidized loans. According to Lantern by SoFi, “your private student loan interest rate will vary according to what kind of terms you could get from the lender.”
There are other options. For instance, a Parent Loan is for students that don’t qualify for financial aid or require a co-signer. But, like the others above, the interest rates depend on the type of loan.
In the end, the average interest on student loans factors into a decision to apply for one. Generally, this rate is a percentage of the loan’s principal. It’s not detrimental if you take out a loan for under $10,000. However, the interest is significant if you need $40,000 for a college year.
Plus, interest rates change throughout your term. They’ve been low over the last few years. However, rate increases occur regularly to stave off inflation’s effects. So, what you pay now could be much higher by the time you graduate.
The goal of a college degree is to pay it forward. In other words, either apply your skills to a job or a higher degree. Thus, consider if a student loan has a proper return on investment.
Will your education results help you get a high-paying position or gain acceptance into a master’s or doctorate program? Will it cause financial issues due to a lack of post-graduation movement? You must ask yourself these questions before deciding if a student loan is right for you. Ultimately, you want to thrive instead of surviving your post-college life.
Whether or not you should pursue a student loan depends on several factors. First, carefully examine each to make your decision. A successful college career depends on it.