Game of Loans
When you play the game of loans, you win or you… work very hard for very long time just to pay it off.
Not that Cersei Lannister had any issues with spending frivolously (shame!), but us mere mortals and non-fictional characters actually have to pay our debts. Sometimes they work out in our favor, sometimes they put an enormous financial strain.
How do we know whether student loans are worth it? This article will try to highlight the most common misconceptions and potential pitfalls of taking out a loan to finance your studies.
Rules of the Loan Game
So, what are loans? Basically, a loan provider gives you an amount of money, which you return in installments, increased by the interest rate. Sounds simple? In theory, it is.
However – and this is where the trouble sometimes kicks in – the interest rate can sometimes grow to become even bigger than the loan. We are humans, and therefore emotional beings, so – not always the most rational. We spend, we find it hard to stick to long-term plans, we indulge our every whim, and guess what – sometimes we can’t afford to pay installment in time, sometimes for months.
To spin the matter just a little, federal government affects the loan policy and is heavily involved with the whole venture.
Advantages and Disadvantages of Loans
Not following the repayment plan is a huge problem, because the loan is then reprogrammed, penalty points are added, your credit score is affected. And the interest compounds. Compounding may work very well when you are the one lending money, but in case you are borrowing – um, bad news.
Of course, not everything is black. Typically, loans are more accessible – you don’t need to be a valedictorian to get them, you don’t even have to be top of your class – that’s what makes them so appealing.
Yet, student loans are a big industry and present one of the biggest debt-producers in the USA. Student debt in the USA is currently close to 1.6 trillion dollars. Whew, talk about the golden goose!
Mistakes to Avoid
One of the biggest mistakes in getting loans, and we can’t stress this enough – people don’t do their research.
Make sure you explore and get acquainted with loan provider(s), and get full knowledge of their conditions and repayment plans. Currently, in the USA, there are eight ways to repay loans. Most people opt for what “sounds best” which is, more often than not, the worst option in the long run.
Doing things haphazardly in terms of loans can lead to a lot of suffering and financial issues in the future.
Make sure you inform yourself about all the repayment plans. In some cases, you might even be eligible for loan forgiveness. Talk to different people and try not to limit your source of information to only one person, especially not just one company representative.
What They Don’t Tell You
A big issue with repayment is delaying it and/or not following through. This is where personal responsibility comes in. Don’t delude yourself – it is your job to do thorough research and fulfill the conditions you agreed to.
That is why people often take forbearance to mean divine intervention and mercy on the loan providers’ part. Guess what – everyone’s in it for the profit. Forbearance in simplest terms means suspending your repayment for a period of time, BUT the interest often continues to accrue. Use it wisely.
Can you declare bankruptcy and get out of it? Not with student loans – you basically owe the money to the federal government, and the state always gets what it’s due.
So, sometimes it seems a good idea to consolidate. Basically, people take out another loan to finance the current one – and they are consolidated, the new interest rate being the average of two respective rates. The problem is – this rate is rounded, and, although the difference might seem ridiculous, in the long-term, it could significantly increase your debt.
People often forget the possibility of scholarships – they get wrapped up in the loan mentality and cut off any other options. It is often a matter of ‘tunnel vision’ – when you are so focused on the pressure at hand (i.e. the debt) that you forget to even look at other options.
Why not use scholarships, for example, to refinance your existing loan? Scholarships are given for various reasons: academic merit, field of study, demographics. You could easily be eligible for several scholarships right now on ScholarshipOwl. We specialize in matching generous scholarships to your specific profile and criteria. Easy as 1,2,3. And no repayment!
ScholarshipOwl also communicates and co-operates with several serious loan providers. If, for whatever reason, you need that loan, make sure you check out our reputable partners: Sallie Mae Loans, CommonBond, and College Ave Loans. They offer fair conditions and expert advice.
New Look at an Old Game
Compared to 1978, tuition fees have increased 1334%, whereas the prices of food and beverages3 have gone up “only” 265%. Average student borrower is in debt of 28,500 USD4. And only 60% of enrolled students actually graduate5. Let’s not even go into prospective employment.
All of this paints a bleak picture of short-term, disastrous policy for student loans, especially when viewed along current employment opportunities and wages. Although the policy makers and loan providers are secured, and get their investments back eventually, it leaves a big question: who cares about the borrowers?
Maybe Cersei Lannister would have been more forgiving, after all – you would just have to fight the Dragon Queen. In the meantime, though, make sure you check out ScholarshipOwl and apply for numerous scholarships. They could alleviate a lot of your worries with repayment.
Let’s set you on the right, easier track of financial opportunities.
***We might be compensated a referral fee by some of the companies mentioned in this article.