Education should be accessible to every individual. Education allows people to learn about the world, about society, and to make a larger impact in their jobs. But obtaining a higher education in a credible institution can be a huge investment. This means that to a lot of people, the solution is applying for student loans.
Student loans make it possible for individuals to go to college to have access to a better future. While the expectation after graduation is to have a better life, the opposite can be true as well.
Not everyone’s lives improve because of student loan debt. In fact, the alarming effects of student loan debt can go as far as someone reaching retirement age and still not being able to pay student loan debt in full. In fact, many individuals live their entire lives with debt.
As of the time of this writing, student loan debt is at a record-high exceeding over $1.5 trillion. This is according to the federal reserve. While there are excellent strategies on how to deal with student loans, others don’t find out about them or just discover them when it’s too late.
As a result, student loan debt can create a big obstacle. This is why it’s important to be smarter about money and to be more knowledgeable about student loans. Otherwise, you are at risk of having a difficult life.
Here are the alarming effects of student loan debt:
Much like other loans, student loans can affect your credit score. If you know how credit cards work and if you know how to improve your credit score, you know how late payments can have a negative impact on your FICO score.
The same principle can apply as major credit bureaus see student loans the same way they do other installment loans. Low credit scores can give you a lot of disadvantages. For one, it will be harder for you to make major purchases through a loan as lenders will see you as irresponsible with handling debt.
This means that it can be harder for you to get a house, a car, or start your own business. Moreover, with a low credit score, you can be charged with higher interest rates. Even insurance companies determine insurance rates through credit scores.
It doesn’t help to be overwhelmed with student loan debt. One good solution for this is to apply for student loan consolidation. To consolidate your student loan is to repack them into one big loan. These are its benefits:
If you miss a lot of payments, it can be even harder for you to pay off your student loan debt. This is because of the interest. As you have more missed payments, your total loan cost will continue to grow. According to Student Loan Hero, “depending on the type of loans you have, such as unsubsidized federal loans or private loans, interest will continue to accrue on your loan during deferment. That growing interest can cause your overall balance to increase and result in a higher total loan cost.”
Moreover, according to Investopedia, “student loans are very rarely discharged in bankruptcy court.” In other words, it’s hard to escape student loan debt and you can end up paying for it for a lifetime.
This is the worst possible case that can happen. Another excellent strategy in dealing with student loan debt is to refinance student loans. It’s much like student loan consolidation in a way that all your student loans will be repacked into one bigger private loan.
But with refinancing your student loans, you can have a lower interest rate. This is the main point of refinancing student loans, to pay lower interest.
With the combined pressure of having a lower credit score and a vicious cycle of having to pay for student loan debt for an indefinite amount of time, it can be harder or even impossible for you to pursue your dreams.
If you’re still to apply for a student loan, know everything there is about it. Learn about the best strategies in dealing with student loan debt such as:
It’s also ideal to build your credit history earlier on. This is so you can avail of student loans with lower interest rates. Here are topics that will be helpful for you in building your credit history:
Another reason why it can be harder or impossible for you to pursue your dreams is that the feds can seize your funds. Having a federal loan that’s been in default for 270 days can disable you to get a state or federal tax refund.
Moreover, the feds can also take government payments such as Social Security. Wage garnishment is also a risk.
This article was not written to discourage you from applying for student loans. The reason for this article was for you to become more aware of the dangers if you become irresponsible with debt payment.
This way, you can further understand the gravity of having student loan debt. To avoid experiencing these crippling effects of student loan debt, gain knowledge, be responsible and know the best ways to pay off student loan debt.
Know that student loans are excellent tools that were designed to help out students. They are for you and are not meant to work against you. How this tool will serve you is up to you. Use student loan debt to help you and not harm you.