Student Loans
26 January, 2018

Everything You Wanted to Know about Student Loans


Nowadays, students who do not have student loans can call themselves truly lucky, but such people are few. However, loans taken to cover the expenses for American education services are considered as a positive debt, since they allow people to invest in themselves and, eventually, the debt will pay off and even bring profit. College access loan is similar to avocados of the financial world – just like this fruit supplies your body with ‘good fat,’ which is necessary to maintain health, student loans are good because they enable students to benefit from knowledge and (in most cases) successful career. Nevertheless, avocado fat is still fat, while student debt remains a debt. Realizing this fact will keep you from gorging on both of them.


We have prepared a list of five things you should know about student loans. Whether you already have one or planning to take it, think twice before incurring unnecessary expenses.


Things to know before applying for student loan

Student loan debt is soaring

To make an informed decision about taking a student loan, you need to know that currently, an average American student has a debt of about $30,000. Let’s have a closer look at the numbers. If you are one of such students and your repayment plan is 7% during ten years, your interest will be $11,000. However, the same 7% but with a 20-year plan will result into a 25,000-dollar interest, and you will have to pay $55,000 eventually.


The burden boils down to the interest

One of the factors to consider before taking out student loans is that you will be mostly paying off the interest, not the principle. At least, in the beginning. Unless luck smiles at you and gives you an opportunity to get a job with a huge salary (already as an intern), you’ll spend quite a few years working just to cover the debt interest before you will be able to increase the payment. In the nutshell, you’ll be working your fingers to the bone and you won’t be even paying off what you actually borrowed! We regret telling you this, but this is exactly how all payments work. It hurts, doesn’t it?


Slow and steady, buddy!

Before finishing off the loan, you will have paid off the principle two or three times. However, if you take it slow and plan the process carefully, you can outwit the repayment process. In this case, you will be the slow and steady who wins the race. How does it work? Let’s imagine you inherited huge money from your distant relative. The first thought that comes to your mind will probably be “Finally I can get this debt off my back and be free!” However, you may incur additional expenses. You should pay out in big chunks only if you will be able to afford it for a while, not just make one big payment. If your credit agencies see that you have increased your payment considerably and then suddenly lower it, they will interpret it as a sign of financial difficulties. In case you are not 100% confident that you can keep up with higher payments, refrain from raising it and stick to manageable sums.


The grace period is on your side.

Good timing can be decisive. If it’s possible, do not consolidate your payment until you’ve graduated, but do not delay it for too long, either. Normally, you will have a half-a-year grace period, during which you are allowed not to pay off the debt. What you probably do not know about is that you can lower your interest rate if you wait this period out. On a sidenote, keep track of the overall interest rate ‒ if it rises at any stage of the grace period, it’s better to start paying immediately. You can think about consolidation later, when the rates become lower.


There are other people like you

Sometimes you might be thinking that you are the only one affected, but this is not true. In fact, many successful people have been there, too. For example, Michelle Obama had just finished paying off her student loan debt before she became the First Lady! So don’t let these reasons to avoid student loans become depressing, just turn them to your best advantage. Forewarned is forearmed!




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