No generation has gathered more student debt than the Millennial. Research indicates that subjects under the age of 30 in the US owe $369 billion in education loans, a figure that has more than doubled since 2004.
The worst part about this is that most students are in this predicament by design. The system is geared towards extending as much credit as someone might ask for, even if it is way more than they need. College students, due to inexperience, end up taking very large loans and using the extra money to buy luxury items just because they can. The extra funds can be tempting but you should think about how you would be using them well before applying. Here are some adverse effects a student loan might have on your long-term fiscal health.
Buying a Home Might Become Very Difficult
Student loan debt is not only a major lifestyle influence, but it may also spill over into decisions you make about big purchases such as a home. Reports indicate more than 55% of millennial respondents in studies claim they were reluctant to buy a home due to not having enough money saved on top of excessive student loan debt. Hefty monthly payments eat at your ability to save significant amounts, no matter how lucrative a job you may be working after graduating.
Grad School May No Longer be an Option
Students coming out of undergraduate programs with hefty amounts of loan debt will be very reluctant to go through grad school and see that figure increase due to another loan. This may hurt your ability to get a dream job, improve your standard of living, and pursue a career of your choice.
Your Net Worth Would Go Down
To not have to take on debt in the early stages of your career is an incredible privilege and is not something most students in the US can realize. The hard facts support this statement; the Pew Research Center released a report that stated that the median net worth for households headed by graduates who have taken on debt is less than 15% of the same for a counterpart without any debt hanging over their heads. That is a ridiculous disparity and could be taking a toll. More such reports, as well as solutions to the debt problem, are available at NationaldebtRelief.com.
Aspirations Become Hard to Follow
In a world where big decisions are increasingly motivated by finances alone, student debt is a really difficult force to reckon with. The amount of debt you have might directly force your hand when it comes to big lifestyle decisions and following your dreams. You might have to set aside noble ideas of working for exciting new startups that might not be paying enough initially, or non-profit organizations looking to make the world a better place at least for a while as you seek out more lucrative but perhaps less fulfilling opportunities elsewhere that will let you cover your payments.
Your Credit Score Might be Adversely Affected
Student loans are treated as any other kinds of installment loans by the chief credit bureaus. Your FICO credit scores could be adversely impacted if you fail to make prompt and timely payments. If you are having poor credit scores, lenders would perceive it as risky and may hesitate to give you credit for home, vehicle, etc. Moreover, if you are having a poor credit score and still manage to get loan approval, you may have to compensate by paying higher rates of interest. Moreover, credit scores are an important consideration for determining insurance rates by organizations such as insurance carriers.
Credit Checks Might Reduce Your Employ-ability
A lot of companies now include a credit check as part of extensive background checks conducted for potential employees. If they notice a few defaults on your loan repayment record, you could be straight-up rejected in screening round, or, at the very least, asked to justify it, which could be a pretty humiliating experience.
It’s Hard to Get Out Of
Student loan debt is perhaps the ‘stickiest’ of all debts. Consumers who aren’t able to meet payments on a vehicle have the option of returning it to the dealership. Homes can be foreclosed too, but there’s practically nothing you can do once the payback process has started for a student loan. The money is already spent, irrespective of whether you completed your course or if you derived value from it. Student loans are not discharged too often in bankruptcy courts either.
The Feds Could Be Seizing Your Funds
If you are having a federal loan and you have defaulted for over 270 days, you might not be entitled to a federal or state refund for quite some time. That is primarily because the feds could be seizing all those tax refunds in the case you are defaulting. They also have the liberty of taking any other kind of government payment like social security. Moreover, the feds have the power to garnish as much as 15 percent of your income for paying back your outstanding loans.
You Could Be Having a Relatively Higher Default Rate
The news is bound to be worse suppose you left your college without completing the college degree. As per the reliable statistics provided by the National Center for Education Statistics, the default rate for student loans is almost 69 percent among people who did not manage to get a college degree in comparison to 24.7 percent among graduates having the relevant certificate, the default rate is just 2.4 percent in the case of students who had graduated and achieved an associate degree while the default rate is barely 1.1 percent in the case of people who have already achieved a bachelor’s degree.
Conclusion
Student loans are more common today than ever before, as a college education is increasingly positioning itself as a necessity for establishing a good career. As such, a lot of people may think that taking out a student loan is your best and only bet. It is, however, important to understand the consequences of such a decision or at the very least learn how to be responsible with the borrowed amount. As per https://www.forbes.com, picking the right college is a hugely important move that will determine your future and your financial stability for decades to come. This is an important decision you should be making with loved ones and trusted knowledgeable people to ensure that you can graduate owing as little as possible, paving the way to true financial independence.