Whatever we are doing now affects our future. You may think that your education may not define you. And you are right about it, partially. Yes, around 60% of employees are not involved with work related to their education. But certain choices you’ve made during your college years may affect your future.
No, it has nothing to do with you deciding to buy an essay instead of writing it on your own. After all, you could’ve just been short of time and in need of some quick and reliable help. It’s not going to have a lasting impact on your life.
Things are getting more severe when it comes to student loans. No, it’s not like borrowing for your education is bad. But if you’re not careful with your decisions, you may face dreadful outcomes. While there’s no problem with focusing on the present, not giving a second thought for the future can actually get you into trouble.
Main student loan mistakes
Before we continue, you need to understand that it’s not taking loans per se that may get you into trouble. It’s not being careful when borrowing money for your education that can cause pretty big problems for you. Let’s check out the most common mistakes that students make when taking loans.
- Borrowing too much;
- Not shopping around for best rates;
- Using loans for living expenses;
- Taking private instead of federal loans;
- Failing to save money;
- Postponing payments without reasons;
Students often borrow too much, without thinking about how they will pay them back. Just because you can take the limit, doesn’t mean you should, as the sum will double by the time you can repay it. Often students take the first payment plan they see, without shopping around for the best conditions. This can result in choosing the wrong interest rates and worse payback conditions.
For some reason, certain students take private loans instead of federal ones. Federal loans are cheaper and have three-year forbearances. Private loans are more expensive and have shorter payback terms. But regardless of whether you are going to borrow from a private or federal fund, you need to remember that the money should be spent on education and paying tuition.
Using the money you’ve taken to cover your education on your spring break vacation is never a good idea. Besides, if you have taken on loans you should try to save money whenever possible. Postponing the payback should be your last resort.
Future outcomes
If you are not making the above-mentioned mistakes, it means that you are going to pay back the loans on time, and you’re not going to face any problems. But if you’re planning to take student loans, and anything from the list above seems like something you can do, you need to consider the negative impact it will have on your post-graduate life.
Realty capabilities
If you make some of the typical mistakes from the list above, you have all the chances to end up having student loan debt. This can significantly decrease your ability to purchase your first home. According to the survey conducted by Equifax in 2015, 55.7% of millennial renters cannot buy a home because they need to pay back their student loan debts.
Renting capabilities
While certain debtors cannot afford to purchase a house, others cannot even afford to rent an apartment. Especially when it comes to big cities, like Chicago or New York. All because of the student loan debts. A one-bedroom apartment in a big city will cost you between $1,600 and $2,000 per month. And it’s hard to pay the rent when you have between $25,000 and $30,000 in debt.
Working options
Student loan debt will not affect only your lifestyle and financial standing. It may also affect your working possibilities. Let’s say you always dreamt about a job that may not provide you with the greatest income, but is interesting and gives you creative freedom. Unfortunately, if you are in debt, you need to think about a salary first.
For example, you wanted to work for an NGO, but you need to give up on that dream, as your college debts keep following you. And your pay at nonprofit organizations will not provide you with a generous enough salary to repay your debts. So, instead of following your dreams, you will have to settle on a profitable job, but will not give you any fulfilment or purpose.
Net worth
The student loan debt makes your net worth shrink. The average net worth of a college graduate with no loan commitment is between $60,000 and $70,000. While the net worth of debtors rarely exceeds $10,000. Which is seven times lower than those who paid back their loans a long time ago.
Credit scores
Your student loans will be treated as part of your credit story. And if you are failing to make the payments, it will negatively affect your credit capabilities. Lenders will be less likely to provide you with the credits to purchase a car or an apartment. As your loans will be taken into consideration by insurance carriers, you’ll also face problems with insurance rates.
Finding the job
More than 70% of companies run background checks of their prospective employees. Around 30% of them check your credit history. Especially if you want to work in the financial industry. Needless to say that candidates that have a history of failing to pay back their loans have fewer chances to get hired.
Funds seizure
Your funds may also be affected by your student loans debt. If you failed to pay back your federal loan within 270 days from the original payment date, the federal government can seize up to 15% of your income in order to cover your debts.
Final thoughts
You may face problems if you fail to repay your loans on time. But that doesn’t mean that you should feel discouraged before taking student loans. Actually, if there’s no other way that you can afford to pay for your education, you should pick one. But make sure that you can pay it back. Otherwise, the debts are here to stay, making your post-graduate life complicated, if not unbearable.