College Loans: The No Good, Very Bad Business Loan

Listen y’all, college is expensive. But it’s an investment in yourself. Once you get that degree you’re set. You ride off into the sunset, buy a home, and start relaxing. It’s all over.

We all know I’m being sarcastic. The student loan is much like a horrible business loan. Where, as Neil Brennan puts it, the business is yourself and maybe you aren’t such a good business.

Don’t get me wrong. I love college. It’s getting me where I want to go, and it’s getting you where you want to go. I think we just need to know how our loans work, so when we get out of college we don’t spend our entire lives paying them back.

So if you’re still with me, you’re probably asking, “How do my loans work?”. Or you want to know how to stay as far from a lifetime of 80 dollar payments as possible. I feel you. Let’s start with what loans you can actually get. There are two types both with their pros and cons.

The first is the good old government loan. They cap off at around $5500 per year and come on two varieties, subsidized and unsubsidized. These loans also have a way lower interest rate than private student loans which we will get at later. On top of having lower interest rates, public student loans also have a loan forgiveness route for qualifying people. The only real con to these puppies is the application process can be confusing, but as long as you fill out your FAFSA yearly, you will get approved for something.

So, I mentioned subsidized and unsubsidized loans earlier. Is there a difference? You bet there is. So this part depends on how financially in need the government thinks you are.  Most people will end up getting the unsubsidized loan. This means you can take the money from good old Uncle Sam, but he’s charging interest the day you take it out. This is the same with a private loan. It’s still a bit better than a private loan because the interest rate for public loans are around 4%. I wouldn’t discount the FAFSA, even when you receive that unsubsidized loan it’s still going to save you a couple hundred dollars.

The subsidized loan, on the other hand, is when Uncle Sam hands to the money and you skip off without gaining any interest on the loan until you graduate. They work just like the unsubsidized loans except they don’t accrue interest.

Private loans, however, are just market rate loans that you can take out by applying. So the interest rates can vary from 4.37% all the way up to 11.85% depending on the loan, and these are just the rates for Sallie Mae loans. Even they encourage you to always take out public loans first.

There is always the third option of scholarships to pay for college. I don’t care who you are you can find a scholarship, whether it’s for $100 or $100,000. The little scholarships add up. So take the time to apply to a few and see if you can pay for some college interest-free.

Once we have taken out these loans, what do we do? The number one thing is don’t worry and live your life. Secondly, pay interest if you can throughout school. It will keep your pay back as low as possible. Finally, once you’re out of school know your options for repayment and go kick butt in the world. You got this.

So next season when it comes time to plan out your payment options for college. Keep this in mind. And know I think you’re a great business idea, you just need more information to make an informed decision.  

• college
• life
• loans
• money