College Graduates Betting on the Future on Private Student Loans

With the dramatic increase in fees charged by many universities, students are considering walking the more uncertain path to meet payment requirements. And the risky path is none other than private student loans. Since these loans are related to credit card debt, they are not only risky but also fraught with problems.

When discussing the danger of this option, the first point that comes to mind is that the interest rate on private student loans varies. According to a report called The Project on Student Debt, college students who took out these loans in the 2003-04 school year at an interest rate of 5% took out similar loans at 14% in the 2007-08 school year. It was clearly mentioned in the report that more than two-thirds of people who borrowed privately did not enjoy the benefits of what is considered to be cheaper and safer: federal loans. Now, this aspect is disappointing.

Most students choose to graduate with a degree in their field of interest, but very few make it successfully into the job market. Kristin Schlaud, who earned a law degree from Wayne State University and a master’s degree in commercial real estate from John Marshall School of Law, questions whether or not her degrees were worth what she is currently experiencing. Just three years after graduating from law school, she is completely broke. With banks calling her from time to time, she owes an amount of around $250,000.

According to Lauren Asher, president of the Institute for College Access and Success (the organization behind the Project on Student Debt), college students deserve more protection. The federal government needs to take certain necessary steps. She also said that students should avoid taking out private student loans; particularly when federal loans are affordable for students, that is, they are cheap.

In addition to the fact that private student loan forgiveness for bankruptcy claims is fraught with problems, private loans come with several other drawbacks: students who apply for private loans do not meet the eligibility criteria for deferment programs, loan forgiveness programs or income-based repayment options

Remember, your present shapes your future. Therefore, if you want to have a better future, it is very important to make the right decisions at the right time. And private loans are certainly not an ideal option, especially when it comes to securing your own future.

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