How education impacts your personal finances
Finding the money to further your education is sometimes hard to come by. With the economy in such a downward spiral it's getting even harder. Money doesn't grow on trees right, but when it comes to personal finances education can put a huge dent in your budget.
Student loans
College students are generally the ones that have personal finances impacted by their education and it usually happens in the form of debt. Unless you have received some sort of scholarship to pay for your entire education then you will most likely have to take out a student loan. There are several different types of student loans you can get and there are pros and cons to each one. Let's take a look at a few different loans and some pros and cons to each so you can see how education can impact your personal finances.
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1. Stafford student loans
Pros
- No credit checks. Since the funds are guaranteed your credit report isn't even used in qualifying you for the loan.
- Low interest rate
- Flexible repayment plans. Generally, most student loans don't have to be repaid until 180 days after you graduate.
Cons
- Low amount limits. Probably the biggest disadvantage to a Stafford loan is that they are very limited in the loan amount.
- Requires federal filings
- Multiple borrowings. You have to apply for the loan each year you are in school.
- Limited use of funds. You can only use your loan to pay tuition, buy books or other education related expenses.
2. Plus student loans
Pros
- Pays the entire cost. You can borrow up to the total cost of education minus financial aid.
- Low interest rates
- Repayment plans are flexible
Cons
- It is a parent/ Grad loan. The applicant is responsible for repaying the entire loan.
- Credit check required. You have to pass the credit check to even qualify for the loan.
3. Private Student loans
Pros
- Fills the Gap. When the amount of your education is more than the amount of financial aid you can receive, private loans can be used to fill in the rest of the gap.
- Quick processing. You don't have to go through any of the red tape with private loans like you do on federal loans.
- Funds availability. There is limit to what you can use the money for. It can be used for education related expenses as well as for personal expenses.
- No federal filing
Cons
- Credit checks. You have to have some type of credit history in order to qualify for the loan.
- High interest rates. Private loans will generally have higher interest rates than federal student loans.
So you can see just by applying and qualifying for students loans how education can impact your persona finances. So how do you deal with all this debt once you are out of college? Here are a few suggestions:
- Employment. Hopefully your time in college has not been in vain and after graduation you will be able to find employment. A job is the first step in repaying your student loan. Fortunately with most loans you will have anywhere from 3-6 months to start paying them back.
- Budget. Once you are bring in money make a budget to figure out how much you can pay a month to repay the loan. If you want to pay it off sooner then you will want to pay more than just the minimum balance.
- Stay out of debt. It will be difficult but try to stay out of a lot of other debt; mainly credit card debt.
Learning how education impacts your personal finance before you get started with help you be more realistic in applying for loans and how long it will take you to pay them back.
