Every year, thousands of students fulfil their dream of pursuing higher education with ‘Student Loans’ aid. Initially, student loans go to a certain category of students, such as those studying engineering, science, or education in the US under the National Defense Education Act (now the Perkins Loan) in 1958. The loan was to assist America’s college students in financing their higher education.
Student loans are extremely helpful for bright students who do not have enough scholarship money or whose families are financially weak to pay off their university fees. However, many students from privileged backgrounds also take up student loans as they prefer to be independent and therefore self-finance their college program through education loans. The money that the students receive through these student loans varies on several factors, such as the college they will be studying in, the student’s academic achievements.
Types of Student Loans in India
Domestic Education Loan
Domestic education loan is available to students who wish to pursue their education in India. It can be granted if the applicant gets accepted into an Indian educational institution and meets all the required criteria.
Overseas Education Loan
This loan assists students in fulfilling their wish of attending an institution in a foreign country to pursue their desired course. Only students that fulfil the eligibility criteria are eligible for the loan. This loan covers airfare, lodging, and tuition fees.
Other types of student loans are:
Advantages of Student Loans
Millions of students take up education loans/student loans willingly because they have multiple benefits. Such as, the interest rates of student loans are generally lower, especially in public sector banks, compared to other types of loans. Student loans can be even less expensive for those from a disadvantaged background, as there are government subsidies that pay the interest on the loan for the duration of the course studies.
Secondly, Student loans are easily accessible to the majority of the population as they are available from various sources. Both public and private sector banks offer student loans with extremely simplified processes. Furthermore, several other organizations assist students by offering endowment loans and other aids. Also, the tax exemptions associated with these loans are another major advantage of student loans. The interest disbursed on student loans is fully tax-deductible. It helps the students save up some money during the payback period.
Along with these, student loans have additional benefits. For instance, many families sell off precious belongings to cover college fees, which subsequently disturbs the family’s financial planning. In such circumstances, a student loan can be the saviour. Also, borrowing a student loan ensures that the students are fully invested and devoted to their studies.
The Dark Side of Student Loans
Even though there are several perks of student loans, not every student willingly becomes a student borrower. For some students, their college degree becomes a major burden in their lives. Unfortunately, numerous students have suffered due to these loans.
Due to the rising student enrollment rates, colleges and universities have increased the cost of tuition fees. Hence many students take up student loans under compulsion, which later become debts. Following these debts, one cannot save up money even after getting a job, which creates a huge setback in the initial phase of one’s career.
Student loans become a significant issue, especially for those students who do not complete their courses. There are several instances where students took their lives due to the pressure of debts. In 2017, Student Loan Hero, a financial advising company in the US, surveyed over 1000 student borrowers. More than 70% of the students have reported symptoms of anxiety, headache, insomnia, and other illnesses.
Even many famous personalities suffered due to student loans. One of them is Barack Obama, the former president of the United States, who took student loans in college. However, it took him several years to pay off his debts. In his words, “I was in my 40s when we finished paying off our debt,” Obama said during a speech in 2013.
Student loans were introduced to assist students with their financial backing and pursue their dream courses. However, few changes are required to make it one of the best tools for encouraging higher education across the globe. A collaborative effort is needed from the government, the corporates, and the students’ society to make it a better option for students from economically weaker backgrounds.
To conclude, there are both advantages and disadvantages of ‘Student Loans’, and hence one needs to carefully analyze their needs and goals before applying for a loan.
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