It's true what they say: too much of a good thing can be bad. Nowhere is this truer than with student loans.
Education loans enable students to bridge the gap between the cost of college and what they can afford to pay after scholarships and financial aid have been applied. In this, they are necessary to help students achieve their goals and can be considered good.
Private student loans are also an option. Though they have higher interest rates, the amount that you can borrow each year to pay for college is not capped like federal loans.
How Much Student Loan Debt is Too Much?
At the same time, it can be difficult for students to make loan decisions that will impact them for years. The sum they are considering today can have a great bearing on what they do in the future, like when they buy a house, get married, or decide to start a family. However, the reality of the future is complicated to visualize today, especially for 18-year-old students. Students must get a glimpse of what life with student loans will look like before they borrow to make smarter borrowing choices.Understanding Student Loans
There are two types of student loans: federal and private. Federal loans are often included in a financial aid package. They come with the lowest interest rates. There are student loans specifically for students who show exceptional financial need, and then there are federal student loans for anyone.Average Student Loan Debt
CollegeBoard reports that the average student loan debt amongst borrowers is $29,400. Of 2021 – 22 college graduates, the most recent year for which there is data, approximately 51% of students had borrowed federal or private loans to help pay for college.Should You Take Out a Student Loan?
To combat overborrowing to pay for college, students should first exhaust all other financial options. This means searching for scholarships, applying for financial aid, and looking for a part-time job. If students still require money to pay for college, it's time to look at student loans. Don't wait until your financial aid award letter arrives to consider borrowing money to pay for college. As you begin searching for a college during your junior year of high school (or sooner, in some cases), you should also think about how you will pay for college. At this time, you and your parents should have honest discussions about who is paying for college and what you can realistically afford. Next, use a net cost calculator to figure out the actual cost of college. You can find these on admission and financial aid websites for each college you want to attend. Net price calculators consider the basics of your academic performance and family financial circumstances. The school then uses that information to show what paying for that college will look like for you each year. It includes:- Student Aid Index (SAI)
- Merit scholarships from the school based on academic performance
- Financial aid, such as grants
- Loans