Student Loans vs. Traditional Loans: How to Pay for Online Education
With the costs of higher education constantly increasing, many people make paying for college education a top financial priority. Although a basic right, this non-stop upward trend in college education costs is making higher education inaccessible to many people today. Many stop going to school altogether and look for employment hoping they can save up enough money to go back to school again and earn their degree someday.
College education is a substantial investment into your future. Decisions to go to school most of the time surpass financial numbers. Going to school and earning a degree can open boundless career territories and earning opportunities that sometimes go beyond your conventional expectations.
Nevertheless, financial difficulties cannot be ignored, and exploring your best options will save you from further financial problems both now and in the future. For many decades, Americans have availed of federal student loans and private student loans to finance college education; however, lately, these have been found to be the worst options.
For those going back to school to advance educational credentials by availing of the opportunity to earn a degree through an online education program, you have to explore loan options that will be most beneficial. You may already have traditional loans like a mortgage and other consumer loans, and adding a student loan on top of these could be an irresponsible move.
Traditional Loans and Student Loans; What are the Differences?
Unlike traditional loans like mortgages, student loans can multiply and trouble you for life. As you will be taking on a student loan on top of other financial loans, it is sensible to know the differences.
Special Report on Student Debts
According to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit released on May 24, 2016, American households owe more than $1.3 trillion in outstanding student loans – the second largest consumer debt, next to mortgages. This goes to show that a college education costs more than or at least as much as a mortgage. But risks are higher if you run into a bad debt, resulting in trouble paying your student loans. Know which of the loan options is the best, and why student debt is harder to manage than traditional debt like mortgage.
Closely tied to the financial markets, federal student loan rates are set by US congress through legislations. Interest rates are usually similar to the rate of the 10 year Treasury note with an additional amount added. Most private lenders compute interest using their own formulas. Student loans have interest rates characteristically higher than 30-year fixed-rate mortgages.
Interest rates of mortgages availed from private lenders are continuously set and reset based on movements of secondary markets. Secondary markets are where bundles of loans are bought and sold, and they are extremely unpredictable. A conventional 30-year fixed-rate mortgage interest is set to fluctuate with the 10-year Treasury revenues.
Refinance to Take Advantage of Lower Rates
You can apply for a refinance; many banks and credit unions offer this type of loan product.
You can apply as well, but be advised: very few private lenders offer this type of loan product services, and by refinancing federal student loans, you’re going to forfeit key consumer protections.
Bankrupt? Can You Discharge Your Loan?
When filing for bankruptcy, you have to prove “undue hardship” beyond reasonable doubt to a bankruptcy judge, overcoming contests from the lender – this is a high bar to clear.
Is a Way out Against Bad Loan Servicing Available?
In cases when the mortgage servicer applies payments incorrectly or breaks a law, you can file a case against them.
No such options due to inconsistency of industry standards for student loan providers.
Will The Loan Multiply Over Time?
Not by much. Rules forbidding mortgage loan servicers from setting payments too low and causing the interest to add up prevent mortgage loans from multiplying over time.
Yes, with certainty. Income-based repayment plans and other circumstances can cause student loans to increase over time. Most student loans are structured in such a way that debtors pay interest on the interest. Unpaid interest is added to the principal.
Student Loans vs. Traditional Loans
As both of these loan options are available to you, which do you think is the better way for you to pay for an Online Education? Is it student Loans? Or traditional loans in the form of a mortgage or other consumer loans?
- Published On : 8 months ago on June 12, 2017
- Author By : Ben Fowler
- Last Updated : July 6, 2017 @ 3:53 pm
- In The Categories Of : Loan