Student Loans: Pros and Cons

More and more students cannot afford to pay for college out of their own pockets as college tuition has increased faster than inflation. And even if a person is eligible for work-study, scholarships, and grants, many have to take out student loans to cover the rest. If you try to pay for school solely through work, you may not be able to complete your studies as quickly as you would if you took out student loans. To save enough money to pay for college, many students would have to work for years. They can accelerate their education by taking out loans, allowing them to graduate sooner and seek higher-paying employment. If you don't treat student loans as a significant form of debt, they can be dangerous. Some students may graduate with loans they cannot afford to repay because federal student loans do not take into account your major or anticipated income. This may result in default and late payments. A lack of prior financial education also makes it difficult for students to comprehend the monthly debt they will be responsible for.

Parents who take out Parent PLUS or private student loans may also have trouble paying them back, making it harder for them to save for retirement and other goals. Parents can borrow as much as they want, so many families end up with loans they can't pay back. This issue is made even worse by the fact that parents have few options for forgiveness. When weighing the benefits and drawbacks of student loans, keep in mind the consequences of not repaying them. Your wages, tax returns, and federal benefits could be garnished if you default on a federal student loan. Students who default on their loans frequently owe additional interest and fees in addition to their outstanding balances. The repayment process may be prolonged as a result, of raising monthly payments.