How Student Loans Affect Your Life

The majority of the student population ends up drowning in student loans by the time they finish their four years of college. It acts as a hindrance for freshly graduates as they step out into the field.

One might think that having students will just harm their finances and their budget, right? But that is not the case! Having an immense amount of debt hanging over your shoulders can quietly possibly ruin your life.

Today we shed some light on the various factors of how student loans affect your life.

What Are Student Loans?

A student loan is a loan that students take for their tuition and school-related expenses. Students currently going through their post-secondary education have access to this loan and can use it for any educational purpose. It includes paying for dorm room rents, school supplies, books, and tuition fees.

Sound like a great deal, right? But there is one major setback. The student sare supposed to pay the loan back once they graduate, but the interest keeps rising at an extreme level. As a result, a massive amount of graduates spend half of their adulthood trying to pay off these debts.
The positive effects of student loans get shoved under the carpet when there is a debt hanging on every graduate’s shoulder.

Positive Effects Of Student Loans

The facility to provide full-time students with a way out in the form of a student loan has a lot of benefits as well.

The best thing about a student loan is the undeniable factor that this loan helps less financially able students to get an education. Moving on, if an individual manages to pay them off on time, student loans can help in increasing the credit score!

How Do Student Loans Affect You

When one tries to come up with possibilities in which a student loan has altered their life, they can come up with tons of negative and few positive ones. The positive effects of student loans can drastically turn around as well. The adverse effects overpower the positive ones. Let’s take a look to see why student debt is bad.

1.   Credit Scores

Student loan debts harm your FICO scores. FICO scores are a system developed to aid credit bureaus. It helps them keep track of an individual’s level of debt, their payment history, and details about their credit card usage. Lenders use this credit score to keep an eye out for high-risk potentials and refrain from lending to them.

If a while after graduating, a student with debt history tries to get an apartment or a car on a mortgage, it becomes extremely difficult for them since no one would be willing to lend to them once the lenders take a look at their credit score.

2.   Insufficient Savings

Students having the burden of student loans are also incapable of saving a lot. As a result, they set aside a considerable portion of whatever they earn to pay off the debt with the increasing interest. Having to divide their meager income into paying off liabilities, everyday expenses, and for essentials, there is minimal left that could potentially keep aside as savings.

Hence, this is why it is challenging for graduates to be able to get their apartments or vehicles. They have close to nil savings. How do student loans affect you, you ask? It is a significant drawback.

3.   Job Search Struggle

While going through applicants of potential employees, companies have started doing a background check on the debts of the applicants as well. It means that any individual with a lot of talent and potential might get rejected because they are in debt.

Due to this reason, students drawing in debts and loans suffer a lot and are left emptyhanded at the end. This is a critical answer if you are wondering why student debt is bad.

4.   Hurdle In Career Path

It gets troublesome for fresh graduates to be able to find a job that pays well and is per their degree. Most of the time, it is a strenuous task to find a job right after graduating.

In such cases, when fresh graduates can’t find a job, they grasp at every straw to get any job that pays. The reason for doing is so they can pay off their student loan, which gradually keeps increasing due to rising interest rates.

Students will get into a field that isn’t what they were hoping for just so they could pay, and it would get difficult for them to switch their field later on as time progresses. These hurdles disregard a lot of good things about student loans.

5.   Higher Studies

Another major hindrance is that students in debt do not get the opportunity to progress towards higher studies. The majority of them are still paying off their debts from their undergrad and do not get a chance to pursue higher education due to a lack of resources.

There is a drastic increase in the salary of an individual with an undergrad degree and one with a grad school degree. With hundreds of thousands of graduates every year, the market has gotten very competitive. As a result, individuals with grad school degrees are preferred more.

6.   Playing Safe

Career-wise, a student with a high amount of debt, always has to be on the lookout for well-paying jobs. It means they will never prefer opting for a job that has growth potential will over a job that has zero growth potential but pays well.

Student loans are the reason why those who are in debt have to play safe career-wise as well. Being in debt reduces the graduate’s ability to take risks and leaves them in a vulnerable position.

What Is Student Loan Forgiveness?

Student loan forgiveness is a program made for people who are struggling to get them paid off. There are several types of student loan forgiveness plans, and all of them have a different set of criteria for eligibility.

One might be able to get either all of their loan or some part of it forgiven based on their current employment. For instance, with the help of a Teacher loan forgiveness, one can have a partial amount of their loan forgiven if they have been teaching full time in a low-income educational institute for a complete five years.

Public Service Loan Forgiveness

For a PSLF(Public Service Loan Forgiveness), an individual must make at least 120 payments, which rounds off to around ten years of loan payments. Moreover, one must also be employed to a qualifying employer at the time of repayment of the loan.

PSLF is only for those individuals who are either working for the government or a nonprofit organization or if they have a public service job.

Economic Impact Of Student Loan Forgiveness

The economic impact of student loan forgiveness can be adverse and even compelling at times.

1.    Higher Investment

With a lack of high debt to repay, students will get more flexibility to be able to browse through investment opportunities. It is helpful when a considerate amount of income is not getting spent away for a student loan. Hence, one can use them in other reproductive areas.

2.    Increase In household Investments

Another addition to the list of good things about student loan forgiveness is that there can be a considerable amount of increase in household purchasing and investment as well. Many fresh graduates are unable to pay mortgage since they have other loans on their plates.

With the student loan forgiven, middle-class individuals can opt for household purchasing and investments.

3.    Increase in Business Opportunities

Other than household investments, one can also pursue business opportunities. Student loan forgiveness gives a person a perfect chance to set up their businesses and form small firms. As a result, there can be a boost in the economy as well.

4.    Adverse Effect On Economy

There will be a drastic loss in revenue for the federal government. A huge chunk of student loans given is from the federal government. Hence they might face a huge loss when interest and fees, etc., are forgiven.