5 Reasons You Should Think Twice Before Taking Out Student Loans
Student loans are something that most of us have to deal with. These loans are the price you pay for getting a better education, but it can be a crushing weight. In fact, these loans might have a negative impact on your future, particularly if you’re not making much headway in terms of paying off those loans.
As Martha White writes for Money magazine, “Conventional wisdom holds that borrowing for higher education is a debt that’s worth the investment, since people with college degrees earn about a million dollars more over the course of their careers than people who just have a high school diploma. While this is still true, […] student debt can haunt borrowers all the way to retirement.”
Today, there are almost 40 million Americans stuck with high student loan payments, according to The Blaze, which is an increase from 29 million in 2008. The article goes on to state, “This reflects an explosion of student loan debt, which now tops $1.2 trillion, an increase of 84% since the Great Recession began.”
Student Loans Can Force a Career Plan Change
The entire point of getting a college degree is so that you can land a better job. However, the fact that you’re required to make payments on student loans means that you automatically cannot consider any job that pays less than you absolutely must have.
That means you will be less likely to take a public interest job, or a job that you find personally fulfilling, rather than financially rewarding. You’re forced to make decisions on your employment based strictly on how much you’ll earn, so that you can make your student loan payments.
While fair compensation should definitely be a perk of your job, you can’t neglect finding a role that offers personal fulfillment. Too many people work every day of their lives at a job they loathe, and that reduces their quality of life in the sole name of “paying the bills”.
It May Just Not Be Worth It
A study released by Consumer Reports surveyed over 1,200 college graduates who had finished school with debt from their student loans.
According to the report, of those surveyed, “45% said that college was not worth the cost. 44% reported having to cut back on daily living expenses to make their loan payments, and 25% said they had to delay major financial goals like buying a house. 12% of those surveyed actually had to put off getting married due to their debt.
” Justin Haskins, writing for The Blaze, echoes this sentiment, “Not only has college put many students in more than $100,000 in debt, it has made it very difficult for young people to invest in cars and purchase a new home. This is a big reason why homeownership for young people has collapsed since 2005, when 43% of people under age 35 owned homes. Today, less than 35% do.”
Student Loans Can Lead to Credit Score Damage
You might think that defaulting on student loans is not as bad as defaulting on a mortgage or car loan. After all, you won’t lose your home if you don’t pay your student loans.
However, understand that asset repossession is only one of the negatives in that situation.
The real issue is the massive damage done to your credit score. And, while you won’t lose anything physical if you don’t pay your student loans, you will kill your credit score, which can have long-lasting ramifications that follow you for a very, very long time.
Moreover, understand that “just not paying” is not an option. You can’t get rid of student debt, even through bankruptcy, unless you can prove massive financial hardship.
That’s incredibly tough to do.
Business Owners Need Not Apply
You might think that you need to go to college if you want to own a business. However, the fact is that the debt from those student loans can make it impossible to start a business.
You’re saddled with repaying those loans first and foremost, before you can take risks with your money. In fact, some experts recommend that business owners jump straight into a venture with both feet, rather than spending years at school racking up more debt.
“For young people thinking about going into business, I would tell them to find something they like and go all in,” stated Alex Brueswitz, who never went to college and became the youngest real estate agent in Wisconsin right out of high school.
It Can Cost You Your Tax Return
Most of us look forward to getting at least a little bit back from the IRS after filing our taxes every year. It’s probably the only good thing about paying taxes in the first place, at least speaking of personal finances.
However, if you get behind on your student debt, understand that Uncle Sam will step in to make the situation right by taking your tax return and applying it to your student loans. Yes, the government can withhold your refund if you are delinquent on paying your school loans.
You may also find that your state income tax return is withheld as well. If you’re married and your partner has delinquent student debt, both returns can be taken.
In The End
When everything is said and done, your student loans create an anchor around your neck, dragging you down and preventing you from building the nest egg you need for the future.
It is crucial that you play it smart.Do you really need to attend college?Do you need a degree to achieve the goals you’ve set for yourself?
If you’re simply going to college to “figure out” what you want to do, there are better options than creating $100,000 plus in debt
Yes, conventional wisdom says that you “have” to go to college. However, the fact is that this isn’t the right path for everyone. Unless you really need a degree to succeed, there are better paths, such as starting your own business now, going to a community college, or even enrolling in a tech school.