When thinking of how to pay for education, student loans are often one of the first methods that come to mind. Why not borrow money in order to pay for your education? There are good reasons for and against taking out student loans. And I’m not writing this post to tell you not too (or to tell you too). Instead, I just want to give a few thoughts on taking out loans.
- Private loans vs Federal/Provincial. With private loans, you usually have pretty much no recourse towards getting help with paying it off. However, some provincial and federal loans may be willing to waive some percentage of your loan. Also, when they determine how much to loan you, they usually look to see if you qualify for any bursaries. Bursaries are like scholarships in that they don’t need to be paid back. The more of your money that comes form these, the less you will owe at the end of your degree.
- Be realistic about how much you need. And by this, I mean think carefully in terms of getting a large enough loan that you won’t be needing to hit up the food bank in order to eat, but also not taking too big of a loan. You may be thinking you should just take everything they’ll give you. But if you don’t need it, then don’t. If you do, you can easily end up way farther in debt then you imagine.
- A student loan should not be funding a high life. Everyone knows someone who used their loan to buy a car, fund a vacation, or buy expensive gadgets and clothes. Then, these people leave school (or drop out), find a job, and realize how much farther they are in debt, that their gadgets are now old, the vacation is long over, and the car is in desperate need of repairs. It can be tempting, especially if they give you a large check up front, to go and splurge. But think about how much interest you’ll be paying on that item for every extra year you’ll now need to pay off your loan.
- Be realistic on how much you might make once you find a job after your degree. Talk to others in your program, your supervisor, grad chair/secretary, and anyone else with some information. Don’t assume because you read somewhere on the internet that most grads in your area get a salary of x that it’s true. The job market is always changing, and this can hugely influence what your starting salary will be. Also, the value will be very different if you decide to go into academia (think post doc) vs industry, and how in demand your field is. If your expected salary is $30,000 a year, you should probably be more cautious about taking out $100,000, compared to someone who’s expected salary is $80,000.