Personally, I think student debt should be viewed as a last resort – a necessary evil if you will. Tuition costs are rising at record rates and scholarships, grants, and financial aid might not be enough to cover everything from room & board to books, computers or laptops, and transportation.
The student loan industry has been a topic of interest to the Congress in the recent session, and legislative changes as well as the sub-prime loan disaster are having an effect on the cost and availability of loans. I worked as an analyst briefly evaluating the business climate following the legislative changes, but the company I was with ultimately decided its business model had been made obsolete by law. So they shut down and sold the loans – and perhaps just in time, as last year student loan securities dropped to an all-time low. No analysis could show a profitable model without seriously raising rates on students – sometimes into the double-digits.
If there was ever a bad time to get loans, this is probably it. Unfortunately, its also the time they might be most needed. Investors want a premium on risky loans & bonds, and students are some of the riskiest involved. Many factors are contributing to the cost of education, but at the end of the day the fact remains that prices are going up rapidly.
Credit cards should also be avoided but they can also have their place. On the one hand, they can be used to cover unexpected expenses, to build up credit history, or if paid off immediately, used to get free stuff through rewards programs or frequent flight miles.
In this section, I’ll give you plenty of reasons to stay away from student loans, and a little advice on how to find the right ones or if you qualify for various programs like Stafford, PLUS, etc…
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