Go to college, they said. It will open doors for you, they said. Obviously, those people have never heard of student loans. Granted, these student online loans will open the gates to good income – mainly since you will have the knowledge and skill to earn a good living.
However, when you see your income coming into your hand and going straight into your loan payment, you barely feel like college made any difference for you. Plus, considering the price that most colleges ask for, you can expect to be in quite a lot of debt once you are done with college.
What are student loans and how does the average student deal with them? How do they affect our current economy? Well, you’re about to find out.
Coverage of Student Loans
Student loans are generally given to students who do not have the ability to pay for the tuition themselves. They can be paid off throughout college if the student has a source of income – or they can be paid off once the student has finished college and has begun a career.
Student loans are basically split into two categories: tuition fee loans and maintenance loans. Obviously, the first category will cover your tuition, so the only things you will have to deal with will be your rent, groceries, and other living expenses.
Some students, however, receive grants for their merit – meaning that they probably will not have to pay for their tuition anymore, because the state has already paid for it. In that case, the student will only have to pay for their living expenses, their books, and their material for study – which will call for a maintenance loan.
The lower the possibilities of the student, the higher the maintenance loan will be. Bear in mind, however, that the bigger the loan, the higher the interest rate will be – and the more you will have to pay in the long run. This is exactly how the vicious cycle of student debt is formed.
The Debt Situation
Borrowing to support your time in college may seem like a wonderful idea – but the truth is, student loans are the second biggest cause of debt nowadays, following right after mortgage debt. It even beats auto loans and credit card debt.
Only in America, there are around 44 million borrowers that together have gathered a debt of $1.52 trillion – while the average student owes around $37,172. The students who went for medicine and law are the most in debt, whereas arts and education are somewhat more manageable.
The state in which the student is will also be determinant of the amount of debt. The amount of student loan debt in Delaware, for example, is significantly higher compared to the debt in Wyoming.
At the same time, however, this debt can be paid off – provided the student follows a meticulously set budget plan. As long as they stick to the payment schedule, the loan should be over within a couple of years – rendering the student debt-free.