You have probably read about the student loan bubble in the United States. It is actually pretty scary to think about how dire the crisis is. Here are some statistics that should alarm you:
- The average student loan debt stands at $30,000.
- Total student loan debt in the United States is $1.59 trillion.
- The student loan default rate is 10.1%.
There are a number of reasons that the student loan default rate is high and the economic risks of defaults are a major concern. One issue is the number of people that pursue degrees in fields that don’t offer a great employment outlook. Economic concerns are also a factor. The 2008 global recession took its toll on the job market, which left a lot of struggling college graduates in its wake.
However, there is another big concern that many people don’t talk as much about- people overborrowing with student loans. You need to pay close attention to the amount of money that you take out for your student loans. If you borrow too much money, then you might be stuck with an unnecessarily high debt load in the future.
You don’t want to take this lightly. Excessive student loan debt can leave you in a bind if you are trying to buy a house. If you struggle to pay your loans off in the future, then your credit may suffer. This could hurt your chances of getting a job, finding an apartment, qualifying for a credit card or any other life changes.
Are You Taking Out Too Much Money When You Go to College?
As you enter your college and post-graduate years, it may be tempting to take out more money than you need to pay for your education. Unfortunately, you may find that the consequences for this will be significant down the road. You need to decide whether taking out additional money to pay for parties, road trips or other nonessential expenses is the smart move.
Here are a few things for the next generation of leaders to consider so that they do not overborrow for college funding. You should really do your due diligence before taking out any amount of money. You may find that the loan you are seeking is a lot higher than you need, which can be problematic for your financial future.
Understanding the Costs Through Proactive Education:
Enrolling in a financial wellness course like that from Ascent Funding is a smart investment of your time. These types of classes will equip you with the knowledge that you need to understand how much money is required to fund your education without taking on more than you can afford when it comes time to pay the money back. A financial wellness course will set you up for success when it comes to managing your wealth later down the road. You will never regret empowering yourself with this knowledge and valuable skill set.
Minimizing Your Borrowing:
When the money is free, it is easy to think that you need more than you truly do. However, not being cautious with the amount of debt that you take on can have disastrous consequences. The US Department of Education provides students with a free online budgeting tool that can help you to fully understand the costs so that you are able to minimize your borrowing. Many students erroneously borrow more than they need for basic education, using that extra money to fund extravagant lifestyles during their college years.
Exploring Different Aid Options:
According to the experts at Ascent Funding, “you’ll want to not only consider your college expenses but also your sources of income as well.” This means that you should explore other avenues to find funding for your educational endeavors so that you are not putting all of your eggs in one basket. Before you take out a costly student loan, it is prudent to look into additional sources of income. Good options include scholarships, grants, and fellowships. Campus work-study programs can also be an invaluable source of income for many college students.
Negative Consequences of Borrowing Too Much:
There is a myriad of consequences that come with taking out an excessive amount of money for college. When you finally get out into the real world, you are going to want to use this time and money to buy a house, get married, start a family, or travel the world. Borrowing too much money in your college years will only serve to saddle you with too much debt during what should be an exciting and stress-free season of life. Taking on too much student loan debt may also require that you get a second job so that you can afford to pay them off each month.
The wide availability of student loan programs combined with the fear that you may not have sufficient funds to make it work on your own lead many young adults to borrow more than they need. Being smart about your borrowing decisions will pay off big dividends both now and in the future.
Be Smart When Borrowing for College
College is very expensive. You probably didn’t need anybody to tell you that. However, you don’t need to get in even more debt than you actually need.
You need to be prudent when borrowing money for your educational expenses. You may find that you are taking on a lot more debt than you need, which is going to haunt you after you graduate.
Fortunately, you can avoid these consequences today. You just need to make sure that you understand the challenges that you are up against and make sure that you plan your finances carefully. You will be able to minimize your long-term liabilities, which can make it easier to qualify for other types of credit, get approved for a rental apartment, get gainful employment or other life changes.
Plan your financial future carefully. You will be glad that you didn’t take on more debt than you needed.