Student Loan Moratorium - Are Student Loans Worth it?

Since EA & ED apps are coming up for all of us, I thought it would be important to have a discussion about the way many of us will end up paying for college. The truth is that most universities have incredibly generous financial aid programs for those who cannot afford their schools. Unfortunately, those who don’t qualify for that aid are unlikely to be able to pay hundreds of thousands out of pocket - and thus will likely need loans. Now, in the US, you guys have been benefiting from a student loan moratorium which is expiring soon and unlikely to get extended again. For those getting a new loan, you can probably expect to have to actually pay for it moving forward.

Student loans are an invaluable tool - backed by the government. They allow students to pay for the high cost of education, while also taking advantage of the massive opportunities it can bring. A degree can exponentially increase your earnings power, and is a prerequisite for accessing certain industries. However, it is important to keep in mind that it is a large financial commitment, and one you are making at an incredibly young age. If your degree will not produce a substantial boost to earnings power, and is not a prerequisite, it usually does not make sense to borrow tons of money for.

On the flip side, student loans are incredibly affordable. Despite what many say about affordability, the problems with the loans arise primarily from their size and not affordability. Federally-backed loans are secure for the lenders, and so the rates are much lower than what a new-credit student could justify, and especially not in such large amounts. Federal loans do not require pay-back until studies are over, and also are based on income-repayment. If your income does not justify your payment, they will work with you to bring it down. All of these advantages do come with the drawback that they cannot be washed away with bankruptcy. It is for this reason that it is not something to take lightly.

The fact that we can borrow hundreds of thousands in uncollateralized debt at such a young age with no credit is quite amazing, but we also need to be careful, because messing it up will destroy your credit, and because it never gets washed away, it will stick there until you do eventually pay… I hope this has helped and Good Luck for College Apps!

By: Mateo Gjinali