Loans are taken out by roughly 65 percent of students attending a four-year university, which amounts to more than 1.75 trillion in student loan debt. With the prospect of student loan forgiveness providing relief to millions of Americans, those who already owe money have reason to be excited. However, if you are one of the students who needs money for the future, you may be wondering what impact it will have on future loans. Does this mean that you can plan on having your loans paid off by the government in the future?
The answer to this question is a blanket “don’t count on it.” This type of loan forgiveness is controversial and hard on the national debt burden, so it may or may not happen again. So, as a good financial steward, you need to take out future loans with the full expectation that you will be the one paying them off in full.
With that in mind, should you take out a loan for college and if so, what type of loan is the best? Let’s dive into it:
Should You Take Out a Student Loan?
Deciding to take out of a loan to pay for college depends on several factors including which college you want to attend and the type of degree you want. Factors to consider include:
What type of degree are you working toward and what is the salary potential for it upon graduation?
If you are getting a degree in certain fields like engineering, law or data science, the market is paying high salaries that could quickly pay off a loan from a public university or private university.
If you are getting a loan for a liberal arts degree like English, psychology or sociology, the salaries aren’t quite as high coming out of college. In this case, you might consider attending a less expensive university that will lower your total debt amount and shorten your time to pay it off.
What is your cost of living after getting out of college?
If you are living with your parents and don’t have to pay for living costs like rent and utilities, you could pay off your loan quickly with your full salary upon landing that first job out of college. If you’re planning to live on your own, plan on attending a less expensive junior college or public college so you’ll have a smaller loan to pay off.
Are you able to work during college?
Before considering loan options, let's take a look at ways to pay for part of your own college.
With some degrees and colleges, working your way through college is possible. Some colleges make it easy to get a class schedule that supports working all year long. Others, like big public universities make it hard to get the classes you need at the time you need them to make working possible.
The degree you are getting can make a difference too. If your degree requires attendance at a lot of hands-on labs, squeezing work into your schedule may be more difficult. However, for other degrees, it’s totally possible to pay for your education, especially if you are able to go to a local school and continue to live with your parents.
If you live on campus or nearby, another potential is seeking a federal work-study job or a job on campus. Generally, these jobs are designed to be more flexible with a college student’s schedule and can be a great source of extra income to help pay for college.
Another option is paid internships in your field of study. These are usually open to students in their junior and senior years.
Are you able to obtain a grant or scholarship?
Other options to obtain the finances needed to attend college include grants and scholarships.
While scholarships are generally awarded based on the merit of someone’s achievements, grants are given based on factors like income and demographics. Unlike a loan, these funds are given to individuals with no expectation of having to pay them back.
Both grants and scholarships usually require filling out an application. Scholarships are typically given by businesses and community organizations so they each have their own application and requirements.
Grants are often awarded through the college that one applies for. So, you will need to fill out the FASFA form to be eligible. In some cases, you may also need to submit an application or essay to be considered for a grant.
The Federal government also offers a Pell grant for undergraduate students who display exceptional financial need and have not earned a bachelor's, graduate or professional degree. In other cases, grants are associated with the college you attend.
To learn more, check out this article:
If you’ve taken all of the steps above and still need money to attend college, a loan is the next step.
What type of loan should you take out?
Let's take a quick look at what the future of borrowing looks like and the most common loan options available to you. There are generally three types of loans you can take out to pay for college:
Federal Direct Subsidized Loan: This type of loan is from the U.S. Department of Education. The interest is paid by the government while you’re in school at least half-time and for six months after graduation. The interest will also be paid by the government during a period of deferment (a postponement of loan payments).
Federal Direct Unsubsidized Loan: This loan is also from the U.S. Department of Education (ED) but interest will start accruing upon taking out the loan.
Private Loan: This loan can be obtained from a bank or credit union. It would not be eligible for reimbursement from the federal government if another student-loan forgiveness program were to take place.
To find out how much money you can get, you will need to fill out a FASFA application.
With a wide variety of options available to students pursuing a higher education, you will want to explore what the right choice is for you. The best choice for you may differ or could be a combination of the options provided and Select FCU supports you in making an informed decision.