Across Europe, a huge proportion of students are failing to make repayments, and that is a problem for taxpayers who fund these loans. On the other hand, the students themselves find themselves in financial trouble after graduating when they have to pay back student loans. Such perspectives may dampen the idea of student loans, making them seem like a bad choice to all parties, but they aren’t always so.
There are several reasons to convince you that student loans are not a bad choice, but here are just 3 good ones.
1. You need to go to college
The most obvious reason is that they are necessary. Most students may not have the needed funds to pay for their studies, and the student loans are the best choice to compliment their parents’ input. Taking student loans falls into the category of good debt because it’s an investment in the future. If you cannot afford to pay for college on your own, taking a student loan is a very good choice financially.
When statistics on pay for college graduates are compared to those who only graduated high school, the wage gap is huge. The US census bureau, for example, reported that undergrads typically earn 85% more than high school diploma holders. Worse still, this wage gap is widening. Therefore, student loans are a very good choice when you consider the future upsides.
2. Student loans are offered with favourable terms
Student loans are typically offered at a very low, fixed, interest rate. That means you can gradually pay back the loan over several years until it’s cleared without having to worry about rising interest rates. These loans are also tax exempt when offered by the government instead of a private entity. In fact, compared to all other types of loans, the terms of student loans are the most lenient. Considering the upside mentioned earlier, it’s not a bad choice.
3. You’re not alone
Nearly all new college graduates around the world have student loans. Now, you may want to point out that it can’t be good just because everyone else is doing it. And you would be right, but that is not what I mean. Because student loans are so common, lenders also understand and can help you structure a favourable repayment plan based on your income and budget. Even your employer will likely be sympathetic to your situation, although no one can guarantee this. Still, that is another perk you won’t get on any other loan in your life.
Why are people so afraid of student loans?
Taking into account all the benefits of student loans, why would so many people question whether they are a good choice or not? Well, it’s all about the psychological impact felt when you realize you have a significant amount of debt. The average student loan debt in the US is $37,000, $55,000 in the UK, and similar all over the world. If having a $500 debt on your credit card is scary, imagine $37,000 or more!
To avoid looking at it this way, compare your student loan to a mortgage – it might be tough to make the monthly payments for a few years, but afterwards you will never have to worry about it again; and you have a home for life. It’s the same with student loans, which you can also pay back in several years until it’s gone.