The Long-Term Effects of Student Loans
Published November 22nd, 2019

Student loans are no joke. The long-term effects can be dangerous if you don't plan correctly. 

Many college students are inexperienced with finances, and most take out more money than they need. Often they use their extra money to purchase items that that are outside of their means. That new Supreme hoody or Louis Vuitton bag might be a bad idea when you take your student loans into consideration.

Not handling your student loans properly could have a huge impact on your adult life as stated by

 You Might Have to Forego Grad School

Student loan debt can hinder you from attending graduate school. The average undergraduate accumulates $30,000 in student loan debt. Students who are leaving their undergraduate programs with significant amounts of debt often cannot afford to take out another massive loan.

You Might Not Be Able To Afford Buying A Home

Student loan debt significantly impacts one's ability to purchase a home. When Equifax asked in 2015 millennial renters why they did not buy a home, 55.7% of respondents listed “student loan debt/not enough money saved” as the top reason they were not able to purchase a home.

You Might Have to Live at Home

While some renters can’t afford to purchase homes, other millennials with student loan debt can’t afford to rent apartments. Across the board, roughly 14 million young adults between the ages of 23 to 37 are living at home with one or both of their parents, according to a Zillow analysis, released in May 2019.

You Might Have a Lower Net Worth

In 2014, a report from the Pew Research Center revealed that disparities among college graduates with student loan debt vs. those without debt. The median net worth of a household headed by a college graduate under the age of 40 with student loan debt is $8,700. However, the median net worth of a household headed by a college graduate under the age of 40 with no student loan debt is $64,700—which is seven times greater.

You Might Have a Lower Credit Score if Payments are Late

The major credit bureaus treat student loans like other types of installment loans. Failing to make timely payments can negatively affect FICO credit scores. Lower credit scores indicate higher risk and will make lenders less likely to extend you credit to purchase a vehicle, home, etc. It can also increase the amount of interest charged if the credit application is approved. Also, companies like insurance carriers often use credit scores to determine insurance rates.

You Might be Disqualified for a Job

Companies frequently conduct background checks, which now include credit checks. According to an article on CNN, 34% of companies perform a credit check on some job applicants, while 14% do a credit check on all job applicants. If you are late making your student loan payments, you should expect to have this information viewed by prospective employers who might hold it against you.  

More students are taking out student loans to pay for college. However, it’s essential to recognize the consequences of borrowing money and to be disciplined enough only to borrow what is needed.

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