Student Loans Can Be Good Debts
Student loans are in investment in success
The word debt often carries negative connotations, but there are times when debt is considered a good thing. Student loans, for instance, can be considered good debts. It would, of course, be preferable not to have to borrow money to pay for college, but not everyone can finance a higher education with private funds, scholarships or grants. For many, student loans are the next best way to finance an education.
There are several different kinds of student loans. One familiar type is the Perkins loan, which is funded by the federal government. This loan generally carries a low interest rate, but it also is one of the smaller loans. Perkins loans are small, low-interest loans available to students who demonstrate exceptional financial need.
The Stafford loan is another popular student loan option. A Stafford loan is also variously known as a Federal Family Education Loan (FFEL), a direct loan, and a Ford loan. Stafford loans can be funded by banks, colleges, or the government. They may or may not be federally subsidized, depending upon a student’s individual circumstances.
Parents’ Loans for Undergraduate Students (PLUS loans) are another common type of educational loan. PLUS loans are not made directly to students. Rather, as the name implies, PLUS loans are made to the parents of students. A PLUS loan carries a low interest rate and the loan amount is based directly on the student’s actual cost of attending school. Loans amounts are calculated based on the cost of tuition, books, supplies, fees, and transportation costs, after deducting the amount of any other financial aid obtained by the student. A PLUS loan helps bridge the gap between the actual costs of education and other available financial aid obtained by the student.
Student loans and bad credit
Students and their parents are sometimes hesitant to apply for educational financial aid because of bad credit histories. Often, however, student loans can be obtained even with poor credit. Generally speaking, bad credit does not automatically preclude an applicant from qualifying for financial aid so long as the credit history does not include previous defaults on student loans.
Basic lending requirements
- Basic lending requirements for a Perkins loan or a Stafford loan may include:
- A valid social security number
- U.S. citizenship or be legal non-citizenship
- High school diploma or GED
- Enrollment in or acceptance to a college offering a degree or certificate
- Demonstrable financial need
Individual qualifications and financial need vary widely from person t person, and no one can guarantee that a loan request will be approved. However, students who meet these basic requirements are encouraged to apply for loans as needed.
Student loans are considered to be good debts for a several reasons. Obviously, a student-loan borrower is investing in his or her own future. Additionally, the interest paid on student loans may be deductible for income tax purposes. To find out more about potential tax benefits, student-loan borrowers should get advice from a tax professional.
An investment in yourself
In the long run, there is no better investment than an education. Although most people work hard to avoid borrowing large amounts of money, some debts – and student loans in particular — are worth incurring. Even for people with bad credit, student loans are available to help those people who are interested in achieving high academic goals do exactly that.