Pros and Cons of Taking a Student Loan

Taking out a student loan is a path to further education. It can be a better option than paying your own way through school, but it comes with certain obligations.

Like any type of loan, student loans come with a long list of pros and cons. If you’re considering financing your education through a student loan, you should understand these pros and cons before taking any action.

Additionally, it is important to have a clear understanding of the different kinds of loans that you can apply for. This knowledge will greatly influence your future financial situation and decision-making process.

In this article, we’ll go over some basic advantages and disadvantages of student loans and how to get out of student loan debt.

Let’s jump right in.

Pros of student loans

Taking out a student loan can help you build credit

Getting a student loan is the best way to build credit because it creates a long-term relationship between you and your lender. The longer a lender keeps track of you and your payment history, the better it is. It sets a precedent when they look at how much money they can lend you in the future. 

When your lender reports your payments to the credit bureaus, it is considered a positive account. And once you have established that positive history, it helps to improve your overall score. The more positive accounts on file with the credit bureaus, the better off you are when someone checks your score or pulls it for some reason. 

In addition, having a student loan on your credit report diversifies your credit mix, or the different types of debt you manage at once. According to most lenders, managing several types of credit at the same time is more impressive and suggests you are a good potential borrower.

Student loans can help you pay for other expenses

You can use student loans to pay for more than school tuition. The loans can help you to cover the cost of living expenses so that you can focus on your studies. You can use your student loan to pay for food, rent, mortgage, gasoline, transportation costs, a laptop, or computer equipment. And if you have a Perkins or Stafford loan, there are even more options available. 

There are several ways that you can use your student loan outside of paying for school and housing expenses. Have you ever found yourself asking, "Can I pay someone to help me to do my homework?" Well, the answer is yes. Staying on top of your studies will only make your student loans more worth it, so you should definitely consider using your loan money in this way.

You may benefit from a government subsidy 

The government wants to help those who are struggling with their student loans, so they have created a program called Public Service Loan Forgiveness. If you are eligible for PSLF but have not applied, we recommend doing so sooner rather than later because there is no guarantee that this program will be around. 

The program allows those who work in certain jobs to have their remaining student loans forgiven. To receive a student loan repayment, you must have received a federal student loan while attending college. You must also be employed by a government agency and have made at least ten years of payments. 

Student loans offer favorable repayment options

The average student loan borrower has around 20 years to repay their student loans. The repayment period is designed to allow you to repay your loan without having to make monthly payments that are too large for your budget. It may also be worth considering refinancing it with a private lender who can offer you more favorable terms. 

There are options for extending your repayment term or even switching to an income-driven repayment plan if needed. These options may allow you to make smaller payments over a longer period without accruing as much interest. Therefore, student loans are beneficial because you can defer payments until you get on your feet. 

Cons of student loans

Student loans take a long time to pay off 

The biggest disadvantage of student loans is that they take a long time to pay off. This is especially true if you have a lot of student loans. The longer it takes you to pay off your loans, the more interest you will accrue over time. If you are paying a high-interest rate on your student loan, this can add up over time. And if you do not make timely payments on them or default on them altogether, it can affect your credit score negatively. 

Owing a student loan can affect your career choices

Many people do not consider how much debt they will be taking on once they graduate from college with student loans. If you are planning on going into a career field where there is high demand for graduates, then this may not be an issue for you. 

On the other hand, if you are not sure what field of study will work best for your future career goals, then taking out student loans could end up being a huge mistake down the road. Students who are planning on attending college should consider whether or not their degree program would qualify them for employment. 

Get out of student loan debt

No doubt, a student loan is a great financial aid for students to pay for their college studies. However, there are some disadvantages to borrowing student loans as well. You should consider all possible options before opting to take out any type of loan, especially to pay for school. 

SoloSuit has compiled seven tips to help you eliminate student loan debt and move on with your life:

1. Check your eligibility for student loan forgiveness.
2. Take advantage of income-driven repayment plans.
3. Refinance your student loans at a low rate.
4. Consolidate your multiple student loans.
5. Reduce the principal by paying extra.
6. Forbearance or deferment may be an option.
7. Declare bankruptcy.

You can learn more about these seven tips when you read our guide on How to Get Rid of Student Loan Debt.

Settle your student loan debt

If you have a traditional student loan through the Department of Education, you may be able to settle it. However, you’ll need to jump through a lot of hoops. The Department of Education has the power to stop the collection of student loans and can negotiate with you for a settlement.

Only some people will meet the requirements for a settlement. You’ll likely need to prove undue financial hardship and an inability to repay through traditional means.

If you intend to settle your student loans, you’ll need to make sure you have the money available to do so. Often, student loan balances run into tens of thousands of dollars. Even if you can reduce the balance of your loans by half, you may still owe $10,000 or more.

Usually, a settlement arrangement calls for a lump-sum payment to wipe the remaining record clean. Your efforts will fail if you don’t have enough money to settle.

1. Determine if you want to settle with a lump-sum payment or monthly installments.
2. Calculate how much you can afford to pay off.
3. Contact the debt collectors and make an offer.
4. Negotiate a settlement.
5. Get the debt settlement agreement in writing.

Check out our guide on how to settle a student loan debt to learn more about each of these five steps.

Now, let’s consider an example.

Settle your student loan debt with SoloSettle’s help.

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