Should I take out a student loan?

Each year, thousands of students turn to student loans, especially federal student loans, to cover college expenses.

But as important as a college education can be, is it worth taking on considerable debt? If you take out student loans, there’s no guarantee that you’ll find a job or career that pays enough to justify the cost of your education. Let’s look at some reasons why you should consider taking out a student loan, as well as reasons you shouldn’t.

• 3 reasons to take out student loans
• 3 reasons not to take out student loans
• How to lessen the cost of college tuition

3 reasons to take out student loans

Despite climbing tuition costs, taking out student loans to cover college expenses could make sense for several reasons.

1. You may qualify for student loan forgiveness

The federal government offers several student loan forgiveness programs that can eliminate a significant portion of your student loan debt, making repaying your loans more manageable. Some programs, like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness, are only available for qualifying students working in specific fields or for the government or not-for-profit organizations.

If you don’t qualify for these programs, you can also get your federal loan debt forgiven by enrolling in one of the income-driven repayment (IDR) plans available through the federal government. Depending on the plan, your remaining debt balance is forgiven after you make qualifying monthly payments for 20 to 25 years. The forgiven loan amount is currently tax-free with this option through the end of 2025.

2. You may not have to pay anything while you’re still in school

When you receive a federal student loan, it’s either a subsidized loan or an unsubsidized loan. With subsidized loans, the federal government pays the interest that accrues on your loan as long as you attend school half-time. If you qualify for subsidized loans, you don’t need to worry about any costs until after the six-month grace period ends following graduation or leaving school.

3. You have no other way to pay for college

There’s no way around it — college is expensive. Some students may have an easier path if they receive financial support from family. Scholarships and grants can often cover most of, if not all, your tuition and other college expenses. But not everyone qualifies for this type of aid, and competition for awards is often fierce.

Student loans may be your best option if you want to attend college and have no other way financially to make it happen.

3 reasons not to take out student loans

As helpful as student loans are, taking on student debt has some downsides. Here are some reasons to consider not taking out student loans to fund your education.

1. College is expensive

Attending college is a significant financial burden for most students. The average monthly student loan payment is $393, according to the Federal Reserve. Combine that with a mortgage or rent payment and car payment each month, and you can quickly see how lingering student loan debt can cause your monthly budget to inflate. Unless you enter a higher-paying career field, you could struggle to get ahead financially.

2. Student loan debt can delay other life goals

Depending on how much student loan debt you rack up, loan repayment could last decades. If that’s the case, it could cause you to delay or give up on other life and financial goals, such as buying a home, getting married, having a baby, and saving for retirement.

3. You still have to repay loans even if you don’t graduate

Even if you never finish school or graduate, you must repay your student loans. Whether you drop out, face hardship, or change your plans, you’re on the hook financially for any loans you took out to attend college.

How to lessen the cost of college tuition

Whether or not you take out student loans, you have some ways to lessen the financial burden of attending college. Consider the following tips to save money on your college education.

Exhaust federal financial aid options first

If you’re seeking help through financial aid, start with federal options. First, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). The U.S. Department of Education uses the information you provide on the FAFSA to determine your eligibility for federal aid programs, like grants, work-study programs, and student loans.

Federal student loans are backed by the federal government and come with borrower protections you won’t find with most private student loans. Protections you can access include:

• Loan deferment
• Loan forbearance
• Student loan forgiveness programs
• Income-driven repayment (IDR) plans

Private lenders generally offer less support if you’re struggling with loan payments. That’s why many students tend to use private student loans to cover remaining college expenses after exhausting federal aid options.

Qualifying for a private student loan also typically requires having good to excellent credit. Most college students haven’t had enough time to build their credit to the level needed to qualify for private student loans. The other option is to apply using a cosigner with good credit. While adding a cosigner can help you qualify for a private student loan, the financial burden falls on your cosigner if you can’t make your monthly loan payments.

Look for scholarships and grants

Scholarships are a great way to cover college expenses. Some scholarships are open to all students, while others carry specific qualifications. Grants are another type of financial aid. The federal government offers several grants, but you can also find them through your state and local government, businesses, and organizations.

Scholarships or grants don’t need to be repaid, unlike student loans. Use the U.S. Department of Labor’s free scholarship search tool to search thousands of available scholarships, grants, and other financial aid opportunities.

Choose an affordable college

Look for low-cost colleges and universities that offer your desired degree program. Consider attending a local college to save on housing and living expenses. Attending a community college first can help you save money and knock out most of your core classes before you transfer to your desired school. Also, factor in-state tuition costs versus out-of-state in your college decision. Many schools charge more for non-resident students.

Make interest-only payments while in school

If you have unsubsidized student loans, making interest-only payments will help you save considerable money on your overall student loan debt. Private lenders start to charge student loan interest as soon as loan funds are disbursed. Many private lenders allow you to make interest-only payments. Take advantage of this option if you have the financial means while in school.