AP Finance

A student loan can be a big worry for parents, students and graduates. Depending on what country you live in, the loan scheme can vary a lot and you might only have to pay it off when you can afford it and only repay for thirty years before it is written off or you may have to keep paying it back until it is all gone. Usually you will not have to make repayments until you finish your course and you may be able to defer payments if you are not working or earning a low amount. Whatever scheme you use, there is still a concern that having a debt so young can then lead to you continuing the path of debt through your life.

Does debt cause debt?

The argument that debt can cause debt is an interesting one. People worry that once you borrow money you then think that borrowing is completely acceptable and borrow more and more. However, this is unlikely to be the case for everyone. There are some people that do borrow all of the time and others that borrow occasionally and some that do not borrow at all. This can be because of the way that they have been brought up, their attitude towards money and whether they have a need to borrow money.

Having debt early on could actually make someone more cautious about getting into debt at an older age. They may understand more about the stress that goes with being in debt and the responsibility of making sure that you have enough money to make the payments.

Of course, there is also the other side of the equation as well. It might be that you will be used to having money for nothing and think that this is a great way to live your life. That if you borrow you will not have to earn and you will be able to buy all that you need. Hopefully most people do realise that they will have to repay everything that they borrow and they will also have additional charges to pay and so they will need to be very careful with any borrowing that they decide to do.

Is a student loan worthwhile?

Most people do think that a student loan is worthwhile. This is because getting a degree or other qualification will lead to a better paid job. Therefore, although the loan repayments have to be made and the loan costs also have to be covered, the increase in salary will mean that there should be plenty of money available to pay this. If that increase in salary continues for the graduate’s whole career then they will make back many times what they have paid out. Many people also feel that going to university provides a valuable life experience where a young person moves away form home and has to learn to look after themselves. However, it could be argued that they could do this without going to university but move away and get a job instead.

Is all debt bad?
It is also worth thinking about debt in more depth. There are good and bad debts and so taking on debt may not always be a bad thing. If you get a home loan so that you can buy your own house or apartment, one that you can afford, then this would be considered to be a good debt. You will be able to avoid paying rent and you will end up with a place that you can call your own and sell if you need money or pas son to your children. However, if you take on lots of credit card debt because you want to buy all of the latest clothes, which you rarely wear, then this would not be considered to be good debt.

You also need to make sure that you are not paying more than necessary for your debt. With a student loan, you are best to use the government schemes as they tend to have fairer repayment terms and lower interest rates but do look carefully at your options as you will need to compare to make sure that you are getting the best priced loan.

Obviously borrowing the least amount possible is best as well. So, if you can work while you study so you do not have to borrow as much this can help. You may also be eligible for grants or scholarships so it is well worth investigating these as well. You may also want to consider saving up for things and delaying buying them rather than borrowing the money for them. This may not be sensible with a student loan as the sooner you graduate; the sooner you will be able to earn more money and so it may work out better to borrow the money and then repay it rather than trying to save up. Courses can be so expensive that it could take a very long time to save up for them, the same way that it would take a very long time to save up for a home if you decided to save rather than take out a home loan.