The Financial Impact of Borrowing Student Loans

Currently, student loan debt has surpassed credit card debt in this country. The nation’s student loan debt is increasing by $2,726.27 every second. Since many students do not apply for scholarships, many have to resort to borrowing student loans. In a recent study, student loan debt has hindered most millennials from buy homes. Knowing these statistics, it is critical to understand the financial impact of student loans before you start borrowing.

Every student I’ve come across has asked, “Do I have to take out loans?” The fact is, loans can help you pay for your college education if you don’t have sufficient means to pay for it upfront. Because student loans are a self-help aid, if you take out any loan, you are responsible for paying it back.

Some students and parents try to transfer loans to one another, yet, once a loan is taken out by a person, it is their loan–they are the one who is responsible for paying it back. You cannot add anyone else on the loan or transfer the balance to someone else to pay it off for you. Even if you file for bankruptcy, student loan debt will NEVER be removed!

If you don’t receive a degree, the harsh reality is that you’ll be repaying money to the federal government or private lender for a degree you never received. This debt may inhibit your ability to have a secure, financial future. Therefore, consider your options carefully, before applying for a loan. In addition, always borrow what you need, and not what you want! Also, be sure to read all the terms and conditions.

Not all student loans are the same, so make sure you do your research. First, you need to understand the basics, like the difference between federal and private student loans.


Federal Student Loans


It is always best to choose a federal loan before a private loan because of the benefits.

  • Federal loans have fixed interests rates, where the rates never change throughout the life of the loan.
  • The federal government also has the lowest interest rates and flexible repayment methods, whereas private lenders’ interest rates tend to be higher, and some may require you to begin paying immediately.

The stipulation with federal loans is that as an undergrad you must maintain over a 2.0 GPA every semester/quarter to receive aid.

Private Student Loans


Utilize private loans after you have used all your scholarships, and exhausted your annual federal loan limit.

  • Private loans are funded by banks, and there are no fixed interests rates.
  • Private loans are credit-based, so you may need a co-signer or an established credit record to secure a loan.



Jessica Brown, CEO of College Gurl, has been helping students, parents, and guardians successfully navigate the seas of financial aid at post-secondary institutions as a financial aid administrator at various universities. She is also the author of How to Pay for College When You’re Broke. For more information on College Gurl, please visit or follow College Gurl on Instagram and Twitter @collegegurljb.