Home ownership has always been one of the fundamental aspects of the American dream. According to a NeighborWorks Survey quoted in a recent ACA International Article, 60% of Americans still believe that owning a home is extremely important. However, 49% of those who are burdened with student loan debt said that it was a key obstacle that was holding them back from purchasing a home.
The most obvious reason that student loan debt is making it difficult for many young Americans to purchase new homes is simple cash flow mathematics. Even just making the minimum payments on outstanding students loans can take a significant chunk out of the monthly budget for someone just entering the workforce at an entry-level position, leaving little room to commit to a mortgage payment.
Another issue is that because of the tough lending requirements that many banks are imposing today, many young professionals with large balances on their student loans are simply not able to qualify for mortgages. The huge amounts that these people still owe for their education is making them an extremely risky bet for any lending institution.
This situation is certainly worthy of concern, and can be looked at from two different angles. First, it should be a cautionary tale for anyone who is heading off to college and is considering taking on student loans to pay their way. Second, it should highlight the urgency for anyone currently burdened with student loan to get them paid off as quickly as possible!
Avoiding Student Loan Debt
The easiest way to avoid student loan debt is to not take out any loans. While the organizations that make student loans and the universities that accept those loans as payment will tell you that everyone takes out student loans, this is simply not the case. There are other ways to get an education.
The first thing you should consider is how expensive your education is going to be compared to similar options at different colleges and universities. You should also consider how much your education is going to cost relative to the income you can expect to earn after graduating. While many students associate a certain stigma with attending local community colleges versus major universities, there is often a tremendous cost advantage.
You should also consider applying for as many scholarships and grants as possible. There is no shortage of encouraging stories of students who have paid their entire tuition bills in advance because of a number of scholarships that anyone could have applied for. You will have to put in some effort, but it can be well worth it!
If you do need to borrow some money to pay for tuition, make sure that you aren’t borrowing more than you need just to facilitate a more comfortable lifestyle. There are an alarming number of students who are using student loan money to live large in college only to struggle to make ends meet once those college years are over and the loan payments start. You might also want to consider working a part-time job in order to keep the amount you need to borrow down.
Dealing with Student Loan Debt
If you didn’t head the advice of avoiding student loan debt until it was too late, the next best thing you can do is pay those loans off as soon as humanly possible. That means you should do everything in your power to live as frugally as possible until those loans are gone. You might have told yourself you were going to buy a shiny new BMW as soon as you graduated, but holding off on that fancy car until your students loans are gone is essential to your long-term financial health.
In addition to keeping your other expenses as low as possible, you will want to make sure that you organize and understand each of your loans and how they are structured. This will help you determine which ones to pay off first. Once you have a plan in place, all you have to do is ruthlessly execute that plan until you reach your goal of being free of those student loans!
For some people, student loans are a necessary evil. For others, they are a foolish mistake of youth. Either way, they will prevent you from pursuing the type of lifestyle you want if you allow them to hang around for longer than necessary. Make every effort to minimize the amount of loans you take on during your schooling, and then make every effort to pay them off as soon as you graduate.