I have been getting a lot of questions regarding student loans and I thought I would go over some basics! I have been asked questions such as how they work, how risky they are, how easy they are to get etc. So I thought I would take some time to write a blog post about them.
I will start by saying that contrary to what many parents/students think, student loans can be positive. Why do I say this? Well not only is it money that just sits in your bank with no interest to pay on it while in school, it also opens up many opportunities for funding from outside sources. Let me tell you a bit about what I did:
I decided in my fourth year of university I was going to go onto exchange to the University of Edinburgh. However, I was a little concerned about how much it would cost and my parents said that if I wanted to do it, I was responsible to save up the money to go. Although I made quite a bit of money in the summer, I wanted to be able to travel and I needed a safety net in order to do that. That was the point when I started looking into student loans. Prior to my fourth year, student loans weren’t even on my radar because I had been pretty successful with other scholarships and awards.
I got approved for a loan in my fourth year for something like $12,000. I had no intention of ever spending that money, but I wanted it just in case. So I put the money in a TFSA (Tax Free Savings Account) and let it earn interest. Little did I know, that by taking out a student loan, I suddenly qualified for many other scholarships and awards because I was in “financial need.” By the time I actually left to the UK, I had done over $10,000 in scholarships solely due to the fact that I had a student loan. There is a lot more funding for people who are in “financial need,” which is something I wish I had known in my first year.
Now that isn’t to say that there isn’t some negatives to student loans. Student loans can be difficult to access straight out of high-school because students often fall under their parents income regardless of how much their parents can actually contribute. Taking out a student loan requires you to have a certain degree of financial literacy. For some students, when they see $30,000 sitting in their back account, I am sure their instinct is to buy whatever they want. I was very diligent in making sure that I didn’t touch it (and luckily I didn’t need to). As a student you have to remember that a loan is still repayable. However, all of the wonderful scholarships and awards you may receive because of the loan won’t be repayable :)