Advantages of Having A Student Loan

You may think that paying back your student loan(s) is an overwhelming burden. But being in debt for your education isn't all bad.

Getting an Education

Many of us aren't talented enough to qualify for a scholarship, and those of us who are find that the scholarship money will only go so far. Even fewer of us have wealthy family members to finance our education. In fact, most of us fall into that in-between category that doesn't qualify for any type of financial aid other than a student loan. This is the first piece of good news about student loans: without the option of taking out a student loan, Joe Average Student would be completely unable to obtain a higher education. With that education, however, Joe has the chance to make at least three times as much money as he could make with a high school diploma alone.

Deferment

You start your new job and begin paying back those student loans. Then the economy tanks and you lose your job. (Sound familiar?) Not to worry. Many student loans permit you to defer payment for a few months until you are once again gainfully employed, and you can extend the deferment if it takes a bit longer to reenter the work force. Try asking your auto loan company for a deferment and see what they say.

Establish Your Credit

For those students who have no credit history, a student loan is a great way to start. This type of debt is viewed as a responsible endeavor, and if you have a few delinquencies on your student loan, your credit won't be too terribly affected by it, unlike other types of loans.

Lower Interest Rates

Many student loans come with a lower interest rate than you might expect – usually basic prime, or just a little above – and while they are typically adjusted a bit from month to month, a cap is usually placed on the interest rate, so when you sign the loan documents, you will know that your interest rate will never go above the cap listed in those loan papers – regardless of how much worse the economy may get before you are able to pay off your loan.

Uncle Sam

Once you start working, everyone's all-American uncle puts his hand in your pocket to get his share, and he never seems to get enough. This is another instance where your student loan can be a friend to you. You can deduct as much as $2,500 per year in interest paid on student loans. Talk to your tax adviser to find out exactly how much you'll be able to deduct when tax time rolls around.

Hopefully, you now feel a bit better about owing money for your education. After all, an education is one investment you'll earn returns on for the rest of your life.