Wednesday, January 7, 2009

The Many Pitfalls of College Loans

By Steve Collins

There are thousands of students who could not afford to go to college or to remain in college through their graduate school years without college loans. The fact that these loans are the only factor actively allowing some student to stay in school and graduate makes their value incalculable. The understanding that these loans will not have to be repaid until sometime in the seemingly distant future make college loans even more attractive. But that trying day will come, and a few months after leaving college, students are asked to begin paying back the college education loan.

If you have or are thinking about applying for college loans, there are a few things you should realize. College education loans are often your initial experience with being a borrower. It is important that former students make it a priority to establish good financial habits. Students credit histories are usually short, and that can be a strike against you should you decide to apply for any other type of loan. Repaying your college education loans on time each month is a smart way of building a respectable credit history.

You make an agreement to repay all college loans when you accept the money. There are serious penalties to those who disregard that fact. If you do not make your monthly payments, your credit report will reflect that for many years, making it very difficult to get a car or home loan.

Your wages can be garnished. You can even be denied any tax refunds due you. College loans are not so much fun after you actually graduate college, so if you have not applied yet, you might want to consider how much money you really want to borrow.

College loans afford excellent opportunities, but they come with serious adult expectations. Do not treat them lightly. They cannot only get you through college; they can be your initial introduction into the world of financial responsibility. Think of it as a way of proving yourself. Who knows? Responsible repayment of student loans may make you attractive to potential lenders, even with a short history of financial behavior.

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