Take Initiative with Student Loans

In some cases, students take out unnecessarily large student loans. In the short term, life is good. In the long term, these students will be financially-burdened by debt for many years.

In other cases, students refuse on principle to take out any student loans whatsoever to pay for college. If you can financially manage to avoid debt and stay in college, great! But sometimes these students will go so far as to drop out of college instead of taking out a student loan.

When used prudently, student loans can be a great investment in your future. According to the Hamilton Project, college tuition in recent decades has delivered an inflation-adjusted annual return of more than 15 percent. For stocks, the historical return is 7 percent. For real estate, it’s less than 1 percent.

A student makes prudent use of loans by taking initiative in the lending process. Before you take out a loan, you need to know:
A) Is a loan necessary to keep you in college?
B) Exactly how much loan funds do you need?
C) Is the value of a college education greater than your debt incurred?

Accordingly, a proactive student:

- creates a detailed budget before taking out a loan;

- pursues other financial options first: grants, work-study, scholarships, tuition remission programs, savings, et cetera;

- uses a tool such as a SLOPE calculator to know in advance a reasonable debt limit;

- uses a rational decision-making process to weigh the positives and negatives of student loans before making decisions about college enrollment;

- reflects on the value of a college education and knows why college is important (or not) to them.

Your academic and financial success is ultimately determined by the choices you make each and every day. Take ownership of your education and finances to increase your success!