Students apply for college loans because getting a degree is their ticket to the future. The diploma becomes your passport to your next destination – having a well-paying career. Sadly, for many students, instead of a passport, the loan becomes a debt trap – one where they spend decades trying to get out of.
Let’s take a look at “Exhibit A”, the United States of America, the most powerful economy in the world.
According to 2018 statistics, Americans owe more than $1.5 Trillion in student loan debt. In comparison, when distributed among 45 million borrowers, the total amount of student loan debt in America is $521 Billion higher than the country’s credit card debt!
On average, a college student will take out a loan worth $29,800. The median monthly student payment for the loan is $222. That means, it would take approximately 11 years for the student to settle a loan!
When you’re saddled with debt for such a long time, it could have gigantic repercussions on your life and career.
- Say “Goodbye” to Grad School
If you want the best-paying jobs in the industry, you should get a Master’s degree. However, if you’re stuck paying for a $30,000 college loan, how can you afford the cost of going to graduate school? Getting another loan will make your problems worse.
- Forget About Buying Your Own Home
A study by Equifax showed that nearly 60% of millennials reported they could not afford to buy a home because of their student loan. Buying a home is a milestone. In Australia, it is considered the “Great Australian Dream”.
If you are mired in student loan debt, forget the dream and say “Hello” to your parents’ basement.
- The Job Search Will Be Harder
Vetting procedures in the hiring process are getting tougher. According to CNN, more than 34% of companies run a credit check on their job applicants.
If you are in a student loan debt trap, you should expect the Hiring Manager to bring this up during the interview. For many companies, an applicant with a poor credit score is a red flag.
So if you can’t give a satisfactory answer, you may find yourself standing in the unemployment line for little longer.
- A Student Loan Does Not Go Away
If you can’t pay off your car loan, the bank will take away your car keys, repossess the vehicle, and auction it off. If you can’t pay off your home mortgage, the bank will foreclose your property and put it up for sale.
What if you can’t pay for your student loan? How can the lender go after money that has already been spent? You can be dragged into court where student loans are hardly dismissed during bankruptcy hearings.
And what if you took out a federal loan? Guess what? The feds can go after your bank accounts and get whatever is left there.
Getting a loan seems like the easy way to finance a college degree. Statistically, this has not been the case. Instead of paying for your future, you could end up paying off your future.