Loans and Debt

Loans and debt sound scary, but learning and using them wisely will work in your favor. Don't get me wrong though, debt is basically the biggest thing that will get people in trouble finance-wise. Borrowing money will always come with risk, so be smart and be cautious.

Debt that can work in your favor:

You may notice a common thread here. In order to use all of these forms of debt in your favor, you have to:

1. Pay the full monthly payment every month

OR

Make a plan (and stick to it) where you are paying off all of the interest each month, as well as putting money towards the original amount.

2. You keep track of all debt, and NEVER IGNORE IT. Check in every month and don't avoid it. If you don't get on top of it now, you will be paying thousands more in the long run.

Student Loans

Let's talk about student loans. Student loans, despite what you may have heard, are not inherently good or bad. Rather, it depends on how you use them. Taking on debt for your education can be an investment in your future, as it will often lead to higher-paying jobs, but that does not mean you should take out the biggest possible loan for the most elite college. When your options are to use a smaller loan for a value college, or a huge loan for a big-name college, think about future you. Is spending the next twenty years of your life paying off this loan worth the big name? Or would you be happier in the long run with these loans gone from your record and your mind a few years after getting out of school?

Federal vs Private Loans

Student loans generally come in two forms: Federal and private.

Federal loans are loans from the federal government. They come with many benefits, although they differ for each individual loan. These benefits can be things like a fixed interest rate (meaning your interest rate will never change), lower interest rates, and not having to start making payments until you graduate. Federal loans should definitely be your first choice if you do have to take out student loans

Private loans are loans from lenders like banks, schools, etc. These loans typically will have higher interest rates and less flexibility in paying it back. Private loans should come second to federal loans when thinking about how you are planning on financing your education.

That can be a hard thing to be ready for as an 18-19 year old. For some people though, loans feel like a necessity.

Many college financial aid packets will include federal loans, but remember, YOU CAN TURN THAT PART DOWN. You DO NOT have to accept those loans. While in some cases there is no other option, try and explore if there is one for you. Do you have a relative willing to lend you some money? Are you able to make up the amount that the loans would cover over the summer with a job or two?