As the summer ends, students are excited about selecting classes, choosing roommates, and picking out dorm decorations. However, many are not looking forward to figuring out how they’re going to afford school. After all grants, scholarships, and work study positions are exhausted, students still find themselves owing a large sum of money. Often, making the choice to obtain student loans is inevitable.
Whether it be a lack of financial aid assistance or the high costs of pursuing undergraduate and graduate degrees, millions of students acquire financial assistance in the form of loans from both the federal government and private organizations. Unfortunately, when deadlines must be met, students rush into taking student loans before they even get the chance to understand what they just signed up for. Here are five things students should know before going into student loan debt.
Know Your Budget
When you take out student loans, be aware that they must be paid back eventually. This can be tricky; once you have money at your disposal, spending becomes much easier. For a student, expenses add up quickly. Trips to get coffee from the local cafe or excessive visits to the school bookstore for college gear are just a few areas where students love to spend their loan money. While it’s great to have these luxuries, it’s important to budget, save, and try to spend less than money than you were loaned. Once that money is gone, it is gone forever, and you might have needed it for things like food, transportation, and books.
Before you determine a budget, it is crucial that you only borrow what you need and can reasonably repay. Both the federal government and private lenders are willing to loan you much more money than you need. Generally, people prefer to borrow federal loans because they don’t require a credit history and repayment plans are based on your income. Regardless, whether you use a federal or private loan, you can choose not to take out the full loan amount, especially if you don’t need it. In addition, if you take out too much money you are not required to spend it all. The more money you take out, the higher your monthly payment will be. You should also consider several factors, including:
- The interest on your loans
- When the loans start building interest
- Your estimated career salary
The last thing you want to do is take out a loan that is too much and then not be able to afford the full monthly costs in relation to your salary, causing interest to build up every month. Try to consider your expected near-future earnings. That way, you know what you’ll be able to comfortably afford.
Your Career Choices May Be Affected
When you’re hundreds of thousands of dollars in debt, many college graduates prioritize salary over job satisfaction. Not only does this limit several career opportunities, but students often end up stuck in a career path that they have no interest in. Students that hope to pursue further education might be stuck entering the workforce because they just cannot afford to take on any more loans.
When entering the workforce, countless students dream of working in the public sector with big government or non-profit organizations that offer forgiveness programs. However, pay is limited, and with such a competitive job market, these jobs are the hardest to get. Students are forced to put aside their ideal job and work in the private sector in order to make enough money to pay off their loans.
Loan Balances Can Increase Even When You Pay on Time
You’d be shocked to know how many people make on-time payments and still find their loan balances increasing. Generally, this occurs when you are on an income-driven repayment plan. An income-driven plan takes into account your current salary and then identifies a monthly rate that you would be able to meet versus what is owed. Therefore, if you’re working for a low-paying job and your monthly rate is only a couple hundred dollars, that amount still wouldn’t be enough to cover accruing interests and your total debt will increase each passing month.
Being in a “Respected” Profession Won’t Make Paying Off Loans Easier
A majority of college students don’t think it’s a big deal to take out loans because they are pursuing a “respected” profession and they’ll have enough money to pay off their loans when the time comes. Consequently, while in school, these students spend all their money rather than saving it just in case something doesn’t work out.
Sadly, some recent graduates find work in these respected and powerful corporate positions only to realize that their career aspirations have changed and that they would rather take a job that pays less and is more fulfilling.
Debt Can Take a Toll on Your Mental Health
Student loan borrowers can attest to the effects of debt on mental health. Feeling helpless and struggling every day to make a minimal standard of living can be a scary experience. Student loan debt is often associated with the grieving process, where you start off in denial that you could owe such large amounts of money. Then, once you realize that your loans aren’t going anywhere, several different feelings start to rise, including:
Once these feelings become overwhelming, you may find yourself in a state of depression, or anxiety and stress might start to follow you into your daily life. Obviously, sometimes you have no other option than to take out loans to pay for school. If you plan on financing your studies through loans, make sure you’re fully aware of what you’re signing up for and always proceed with caution, as some things are too good to be true. Start by thoroughly researching your options before you opt to borrow a loan that could end up being very costly in the long run.
Ready to be Free of Student Loan Debt? Contact McCarthy Law
Student loan debt can be suffocating, and you’re likely feeling overwhelmed by aggressive collection agencies and high interest rates. If you’re ready to be free of student loan debt and the stress that comes with it, speak to the debt settlement attorneys at McCarthy Law PLC. Our attorneys can help you navigate through the complexities of the student loan system while presenting you with different options you may have in terms of financial relief.
At McCarthy Law PLC, our legal team is dedicated to helping all our clients find a debt-relief solution that suits their best interests. We strive to help you to not only move past this challenging situation but also live a prosperous life, regain control of your finances, and enjoy the money you’ve earned. For a free case review, get in touch with our experienced debt settlement attorneys by calling (855) 976-5777 or completing our contact form today.