How Student Loans Affect Your Life and Personal Finances
Updated on June 23, 2019
Around seven out of 10 university students take out major loans, according to CNBC. Education-oriented borrowing has the potential to affect your life and personal finances in eight significant ways:
1. During college, the loan will help you afford tuition, fees, textbooks and living expenses. It may give you the ability to pay for an apartment near the campus or meals in the university’s cafeteria.
2. Like grants and other financial aid, student loans will make it easier to focus on your studies and earn high grades. You won’t need to work constantly, sell your belongings or skip meals to pay the above-mentioned bills.
3. When you graduate or drop out, you’ll need to begin making monthly payments. Many loans provide a grace period of six months. Student loan debt can become burdensome if you don’t find a well-paying job.
4. You may qualify for a federal tax deduction that lets you subtract the interest from your taxable income. This reduction becomes much more valuable when you earn a substantial amount of money; it isn’t refundable.
5. If you choose a graduated payment plan, your monthly bill will gradually rise as time passes. This option could make the loans more affordable in the years before you gain promotions or raises.
6. Student debt might have a smaller impact on your personal finances if you qualify for a forgiveness program or income-sensitive repayment plan. A low salary may enable you to avoid monthly payments.
7. If you pay student loans on time, this will enhance your credit score. You might benefit from lower insurance premiums and gain the ability to borrow money for other purposes at favorable rates.
8. On the other hand, late payments or a student loan default could harm your credit rating and have the opposite effect. It’s crucial to take advantage of low-income repayment or forgiveness options if possible.
To sum it up, student loans can have a major effect on your monthly expenses, income taxes, credit score and access to higher education. Be sure to plan ahead and conduct thorough research before making any borrowing decisions.