7 Facts You Should Know About Student Loan Forgiveness Programs
It may be easier to get rid of your student loans than you ever thought possible!
As many problems as people have with student debt, there can be a good side to these kinds of loans as long as you maintain control of the debt.
There’s a lot of talk about student loan debt and how it’s inherently bad for the new batch of youngsters entering the workforce. But there is a silver lining to student loans that many people forget about — that it can help build your credit history. In addition, the fact that you get something from your student loans are a large factor in why student loans are good.
When it comes to borrowing money, student loans are similar to mortgages in that they are usually considered “good debt.” Both are large amounts of money that take a long time to pay back. By paying it back each month, you show the lender your ability to repay a loan and prove your creditworthiness, which can in turn increase your credit score.
In addition, you “get” something from good debt. In the case of a mortgage, you get a house and the value of that house generally increases over time. With student loans, you get a college education, which increases your lifetime earning potential. This is why these two types of debt are good debt, rather than bad debt.
Bad debt includes things like credit cards, personal loans, and even auto loans. In the last case, you “get” something from the debt. However, since the value of a vehicle immediately depreciates once you leave the lot and continues to do so with each passing year, auto loans are still considered “bad debt.”
It’s worth noting that bad debt doesn’t necessarily mean that it’s a type of debt that you should avoid at all costs. You can use bad debt with good results. But because it doesn’t deliver anything of lasting value, it’s negative instead of positive.
A good credit score allows you to take on more and higher amounts of “good debts” that continue the cycle of good credit, as long as you are consistently paying off the debts.
While making payments on your student loan debts can be painful, it actually can be helpful in the long run. Many students don’t start out college with credit cards, but do have student loans. These loans give you the opportunity to build up a credit history with the credit bureaus, which shows lenders that you are a responsible borrower.
Borrowers often hit snags when it comes time to repayment, which leads to a bevy of issues regarding credit and loans.
Let’s look at a brief history of student loans in the U.S.
The concept of student loans originated in the 13th Century at Oxford, where students would put valuables in a chest in exchange for schooling. Harvard is credited with creating the first true “student loan” in America, offering students zero-interest loans if they couldn’t afford to pay to attend school. Other schools eventually followed suit, offering private loans through the school.
Taking out a student loan can be a great idea if you need income in order to attend school. However, it’s important to understand what kind of loan you will be getting. There are different options when it comes to student loans:
Federal student loans tend to have lower, fixed interest rates, which can make repayment easier. Depending on your career path, there are options in which you can seek loan forgiveness. A federal student loan can be forgiven under the Public Service Loan Program and the Teacher Loan Forgiveness Program. It varies as to how much is forgiven.
Student loans are extremely helpful when seeking a college education, but repayment can cause many students and recent graduates stress. In cases where repaying a loan becomes difficult, students can work with their lenders to refinance or consolidate their loans. This means putting all their loans together in one bunch and receiving a lower interest rate or better terms. Refinancing a student loan is easier when you have better credit.
If you want to know more about the importance of good credit or paying off your student loan debts, visit debt.com.
Article last modified on June 28, 2019. Published by Debt.com, LLC