By: Rishi Piparaiya, Best Selling Author and Financial Mentor
In general, I am against taking most forms of loans. If one cannot pay for something, I prefer that they delay purchasing it until they have saved the required funds. The only exceptions, however, that I am comfortable with are loans for buying a primary property or for education. Because I consider these as investments for the future rather than immediate gratification. They will pay back in future returns and other qualitative measures (security, peace of mind, pride etc.) that go beyond purely financial metrics.
If you have taken or are contemplating a loan for higher education, these are some things you should keep in mind.
Explore all alternative financing means: Students can access various funding options, such as scholarships and grants, whether from the college or other private or public entities. If you are working and are a valued employee, your company might be willing to sponsor some of your course. It will require one to make a significant effort to find such options and then apply to them. But getting any outright award that doesn’t have to be paid back is far better than taking a loan. So keep a loan as your last resort.
Borrow only what you need: Make a budget, estimate your expenses, and borrow only the amount you need. Limit your liabilities as far as possible and explore other ways to make up deficits. You want the financial burden to be as low as possible when you graduate. Equally, shop around and take your education loan from the institution offering you the best rates and terms–this is a significant decision, and take your time researching options.
Consider part-time or freelance work options while studying: In the current gig economy, one has ample opportunities to leverage time and talent to earn extra cash. If you can freelance along with your coursework, that will provide you with some valuable income. Equally, explore options to work in college while you are studying. You are developing professional and interpersonal skills, building a financial cushion, and reducing your dependence on loans.
Be practical about your course: Most people take education loans on the assumption that their career prospects will be significantly better once they complete the course. If you are taking on a substantial financial commitment to study, be practical and ensure that it will have a meaningful positive impact on your job prospects. If the course does not earn you significantly higher compensation, consider whether it is worth such a substantial financial commitment.
Negotiate your job offer: Once you have completed the course, hopefully, excelled, and are entering the workforce, choose your job wisely. Some employers have programs that could assist you with student loans through sign-on bonuses, loan repayment assistance programs, or other employee initiatives for deserving employees. Enquire about their policies during the job search process and evaluate your offers keeping this in mind.
Be prudent about debt: If you already have an education loan liability, be cautious about taking on more loans, whether through credit cards, personal loans, auto loans, or home loans. Focus on paying down your student loan as soon as possible before taking on more.
Refinance: Economic conditions keep changing, and stay abreast of what is happening in the world of finance. If interest rates are falling, look at options to refinance your loan so that you can save money in the long run or pay off your loan faster. If you are getting better deals to move your loan from one bank to another, evaluate them. Every rupee you save in interest is a rupee saved towards financial freedom from debt.
In a world filled with shady investment opportunities, investing in quality education is one of the best decisions you can make. Even if it comes on the back of a significant loan, it can still be worth it. You just need to plan ahead and be wise about the choices you make. The goal is to get a great education, which will lead to an even more fulfilling life post it. And that can best happen once you are debt-free!