Student Loans: Pros and Cons


Student loans can help you afford your dream school, focus on your education, and build your credit score. On the other hand, student loans can be expensive in the long run and force you to focus on paying back debt instead of pursuing other goals. As you can see, there are plenty of student loan pros and cons. Here’s what you need to know. 

Pros of Student Loans

Pro: Student loans can help you afford your dream school.

Is the difference between attending your dream school and settling for your second or third choice solely a matter of affordability?

Student loans can give you the extra funds you need to achieve your goals. Although the overall cost you will pay after you attend will be higher because of loan interest, student loans provide a straightforward way to fill the tuition gap.

Pro: Student loans can help you focus on school.

If you’re busy working while you’re in school, you’ll have less time to focus on academic achievements as well as extracurricular activities. This may mean losing out on the opportunity to build relationships that may help you later in your career that are built into greek life, school clubs, study abroad, and unpaid internships.

Taking out a student loan can allow you to focus on pursuing your education and building your personal and professional networks at the same time. Plus, delaying your payments until you graduate means that instead of working during your time outside of class, you’ll be able to focus on getting the most out of the opportunities provided to you at your school.

Pro: Student loans can help you build credit.

Paying your student loan bill on time every month will help you build credit over time. Since student loans are considered installment loans, they contribute to credit history and credit utilization factors of your credit score. This may be helpful if you are a younger student and not ready to take on a credit card or a revolving credit line.

Down the road, if you ever anticipate purchasing a car or a home after graduation, having an excellent credit score will immensely help your chances of being approved for a loan and securing a low-interest rate.

Cons of Student Loans

Con: Student loans can be expensive.

Over time, student loan interest adds up, which means you’re paying significantly more on top of your initial loan amount (which is called your principal loan balance).

Federal student loan rates range from 4.45 percent to 7 percent, and private rates typically range from 11 percent to 15 percent. Calculate your financial plan in a student loan calculator to help you visualize the total balance you can expect after your graduate and what you will need to earn to pay it off.

Con: Student loans force you to focus on paying back debt after graduating.

With a significant monthly student loan bill, you might find yourself focusing on repayments rather than other life goals.

If you wanted to take a gap year after college to travel, spend an extended amount of time volunteering, or if the entry-level work in your field of choice is low, you might have a more challenging time pursuing these options after the 6-month repayment grace period is up.

Student loans also affect whether you can afford to make costly life changes, such as moving to a new city, buying a house, or planning a wedding. Plus, you’ll need to factor in the time required to repay the loan, which could mean less time spent with family and friends or enjoying hobbies and pastimes.

In short, you’ll always need to plan out your dreams and your loan payments together.

Con: Defaulting on your student loan can ruin your credit.

If you’re unable to make your monthly payments, you could default on your student loan. A poor credit score takes years to improve and could impact your applications for jobs, apartments, mortgages, or other loans. Be sure you’ll be able to make your payments even after graduation.

Consider Your Options Carefully and Plan Accordingly

Taking on a student loan is a long term commitment. Although the standard repayment schedule for student loans is ten years, OneWisconsin Institute reported that on average, students are taking 19.7 years to pay off a bachelor’s degree and 18.3 years for associates – that is a long time.

Take the time to consider your current financial situation, future job outlook, and desired life changes before committing to a student loan, here are some tips to get you started:

Identify ways to lower your costs while still in school.

Finding ways to save money now can help you better align paying for school with your other goals and dreams. Consider these scenarios:

  • If entry-level pay in your career of choice is low, can you start building your career in your field of interest in earnest while you’re still in school?
  • If you’re experiencing sticker shock over tuition costs at your dream school, are there other colleges that include most of what you want out of your dream school but at a lower price?
  • Or, if you have your heart set on a specific school, are there other ways to lower your cost of attendance, such as living off-campus?

There are tons of tips and tricks on this subject out there. Research, read, and apply the ones that work for you.

Think about your long game.

Although you can’t take into account all the twists and turns that life may bring, it’s a helpful exercise to think about where you want to be after you finish school and how your student loan debt may affect those goals and dreams.

One easy way to do this is to estimate your monthly payment using a repayment calculator mentioned above. Once you run the numbers, you can see what impact student loans may have on your goals. If you do choose to go the loan route, this can be a starting point to begin planning how to balance your dreams and repaying any school debt.

Talk to your academic or financial aid office… seriously.

You may have more options than you think for closing your tuition gap. Make use of all of the resources at your school to get ideas for how to find savings on your tuition and maybe even get more financial aid. Or contact us at Frank! We’re always here to help.

“Interest Rates on Student Loans.” 10 Apr. 2018.