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Published on November 16th, 2020 | by Sunit Nandi


How Student Loans Can Affect Your Other Financial Decisions

When you’re excited to head off to college, ready to take on the world, study and follow your passions, and get the most out of your undergraduate (or graduate) degree, a loan seems like a small price to pay—or rather, re-pay.

But a student loan isn’t free money or a short-term commitment. It’s something you’ll have to deal with for the long-haul. Most people have repayment periods that can last for around a decade, sometimes even more, depending on your lender. This means, inevitably, you’ll be in debt well past your college years and into your life as a young, independent adult.

Your long-term financial stability depends heavily on your loan’s terms, repayment plans, and interest rates.

Debt can weigh even the best of us down, and you want to do your best to pay it off as soon as you can. But before you commit to large loans and the first offer that comes your way, getting stuck with a high-interest rate and inflexible repayment terms, know some of the ways this loan can and will affect other decisions you make:

You might have to let go of grad school—for a long time anyway

For those of you looking to get into grad school within a couple of years or immediately after graduating, your plans might be delayed a fair bit because of the debt you’ve accumulated. Many lenders will also feel hesitant regarding giving you more money while you’re already in debt, but the total amount of money borrowed for your undergraduate and graduate degree can put a massive financial burden on you.

Forty-five million Americans already owe $1.5 trillion in student debt, and this debt doesn’t seem to be getting smaller with rising costs, inflation rates, high-interest rates, and the exorbitantly high cost of attending college.

It might be in your best interest to look into refinancing your student loan or choosing a graduate loan that you can consolidate for a lower rate and more flexible terms. Without these options, it’s next to impossible and almost unwise to head to grad school without a large scholarship, grant, or some form of financial aid.

Given the crippling debt and difficulty in repaying your loan, owning or renting a home can be difficult.icult.jpeg

Buying and renting homes can be difficult or even impossible

For many, the epitome of independence and growth is the ability to buy or rent a home, but unfortunately, that dream can take a hit thanks to debt. Paying hundreds and thousands of dollars a year in loan installments, interest, along with utilities, rent, transport, living and more, can make it nearly impossible to move out on your own or even rent a separate place.

This means a lot of people resort to moving back home after graduation, prolonging their ability to own and sometimes even rent a home, especially in more metropolitan locations such as NYC, Chicago, etc.

Unfortunately, this problem might be more common than you realize, especially as the is economic recession and change in the wake of the COVID-19 outbreak—although there has been some accommodation for students there.

Student loans can impact your overall standard of living and lifestyle

Student loans don’t just affect decisions like homeownership and grad school; they also affect more seemingly mundane day-to-day decisions, too, including many of your lifestyle choices.

You might not realize it, but things like your social life, your ability to travel, your quality of life, and standard of living all depend on your financial health, and if you’re in massive amounts of debt, you might have to cut back significantly. Of course, there are still ways to travel and explore the world, even with debt, but it’s important that you plan carefully and give yourself enough time to budget, cut back on unnecessary expenses and prioritize. You should never skip payments without a legitimate reason, and unfortunately, doing so can affect your credit score, among other things.

This might also translate into other decisions and choices, as well as opportunities that you might have to forgo, for instance, moving across the country for your dream job to retain your well-paying, but boring job that helps you pay your installments.

Travel is an aspiration for many of us, but often, hefty loans hold us back from our dreams.

You’ll have trouble increasing your credit score in the future

A student loan is treated like any other financial liability when it comes to your credit history and score. A major loan, missed payments, and tons of interest will lower your credit score and prevent you from being able to secure other loans, make large investments such as a car, and might even impact your chances of securing certain jobs that look at your credit history.

A poor credit score can also lead to you paying greater interest rates because of your high-risk potential.

It’s important to borrow only as much as you can repay, especially keeping your projected income and earnings in mind. You shouldn’t fall into the trap of borrowing tens of thousands of dollars to party it up during college, only to be stuck with a sucky credit score and major debt in the future. Work with a reliable student loan provider such as Education Loan Finance (ELFI), who will be able to guide you regarding the amount, offer flexible and negotiable terms, and a competitive interest rate.

Your ability to switch jobs and follow your passions can be affected by your student loan.

Childbirth and family planning can also be delayed as a result of loans

This is a devastating consequence of debt that often goes unheard or overlooked. Many families, couples, and sometimes individual mothers put off childbearing and starting their families as a result of student debt. It’s a subject that is often touchy and difficult to broach, but it is a very real consequence that affects a major life plan. Starting a family while drowning in debt isn’t the most effective decision to make, especially if you don’t feel financially stable and able. In that situation, a great option could be to consolidate and refinance your loans and find alternative ways to manage repayment with your partner.

Many mothers and young parents-to-be are financially strained because of the cost of raising a family and repaying their loans simultaneously, and it’s very likely that you may have to wait a few years before you can have a child.

There is a lot to consider when it comes to loans and how we manage and plan to repay them. It’s crucial that you find a lender that is trustworthy, experienced, and helps you plan carefully so as not to hinder all of your major life decisions. If you’re already in college or about to graduate, start looking into options like part-time jobs, saving plans, and things that will help you manage payments better.

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I'm the leader of Techno FAQ. Also an engineering college student with immense interest in science and technology. Other interests include literature, coin collecting, gardening and photography. Always wish to live life like there's no tomorrow.

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