1. Is this your only option?
Everyone should exhaust all available resources before applying for a private loan. A private loan with a 15 year term will usually have an average interest rate of 7-9%, and that’s if you have good credit or a cosigner. If you are a single undergrad you’ll be lucky to get 11% if you’re approved at all.
There are however alternatives, such as qualifying for federal grants or federal loans, which have a lower average interest rate, usually between 3-6%. Qualifying for grants is the best because that’s money you don’t have to pay back. You should always apply for FAFSA before private loans because who knows, the government may feel sorry for you and offer you a buck here or there.
And of course, there are scholarships. These are not always easy to find nor get, especially if you are an average student with average grades. Academic scholarships can pay big time, but above a 3.0 GPA is usually necessary. There are non-academic scholarships as well that can be a great option, such as transfer scholarships which pay by just moving schools. Looking into available scholarships is something every student should do before considering private loans.
A private loan should be a last resort, so apply for anything and everything first. Writing scholarship essays and filling out FAFSA after FAFSA form can be tedious and frustrating, but your future self will thank you someday if it means less debt.
2. Is there a more affordable university?
Maybe you’ve grown up your whole life dreaming about going to a specific university. You’ve then applied and got in. Your dream school. But then you realize how much your dream school costs. This is the time you must ask yourself, is it worth it?
My whole life I wanted to go to Princeton University. The prestige of an Ivy League school and of course, being able to brag to everyone I meet, “Oh, I went to Princeton, no big deal”. What I never considered however, was if Princeton was right for me. I knew early on I wanted to be in advertising, specifically a copywriter. During my senior year of high school I did some research and found that Princeton did not have an advertising program. Luckily, I’m from Texas which has several great universities with award winning advertising programs, so I wouldn’t consider my choice a down grade in the slightest. I also saved myself several thousands of dollars in debt by choosing a school based on its programs instead of its name.
Taking a step back and weighing the school against what you want to do is vital. Your money should go to a program that fits with your future ambitions. Going to a name-brand university may help with networking and give you bragging rights, but what’s most important is prestige in your field, not the general public’s opinion.
3. Have you thought about community college?
Community college may seem like a downgrade compared to big name 4- year universities, but what they lack in recognition they make up for in price. Local community colleges vary in cost depending on location and number of hours taken, but they can be as low as $50.00 a credit hour. That means for one full semester of classes you may only pay $750.00. That is substantially lower than university prices, and the classes are virtually the same. And at community college, your class size will be smaller than it would at a 4-year university, meaning you won’t just be another face in the crowd.
Professors who teach at community college often also teach at universities, which means you won’t miss out on valuable networks. And because your classes are smaller and personal, you are more likely to get recommendation letters, mentorship, or simply help transferring from your professors.
It’s also great way to transition from high school to college if you were never someone who did great in school. Their institutions are usually more flexible and relaxed with scheduling, and without the hefty price tag you won’t lose much if you fail or drop a class. It’s also a great way to get your GPA up before transferring. If you don’t have the grades to get into the school you want, you can load up on community college classes which are sometimes easier or paced more slowly.
4. Will it pay off in the long run?
Another thing to consider is the impact of your degree on your future. Like I mentioned before, the name is not the only thing that can affect your future career. Who you meet in your time at university can impact your career big time. Alumni can help get your foot through the door, so going somewhere with a close alumni network can be a huge advantage.
You also need to consider the monetary impact your school will have. Your debt to income ratio needs to make sense. If you spend over $100k on a degree and only make $30k a year, then maybe you should find an alternative, otherwise be prepared to live like a broke college kid for a very long time. We can argue all day about money not being important or that it will one day hopefully pay off, but if you can’t make your loan payments you may start to regret your choice. Creditors can follow you anywhere and always get their money. That may mean docking your paychecks or ruining your credit if you don’t pay up on time.
5. Do you love your school?
This is an absolute must. There is nothing worse than spending a fortune to be somewhere you don’t love. Your school should reflect your personality. If you prefer small class sizes and intimate campus settings then a big state university is probably not for you. If you hate living in big cities then maybe a small town college is where you should be. Don’t go somewhere because your friends are going or just because it has a popular football team. Go somewhere you love and where you will enjoy being every day for the next four or more years.
Student loans can be both a nightmare and a lifesaver for students. Loans should never be taken lightly and researching to find an option that works for you is essential. At the end of the day, student debt is the best debt you can have. With it you will be able to pursue your dream job which is something everyone should strive for, but if you can limit your debt to a manageable amount then make it happen. Do your research, apply for scholarships, and make your loans mean something. And above all, good luck!