Spoiler: There is no such thing as a smart loan for students, or anyone else, for that matter. There is only smart lending and smart borrowing. No loan is designed for the borrower’s best interest. They are always designed to benefit the lender. That is as true for a bank as it is for a loan shark. They are crafting the best terms for them that they think you will accept.
The real question is, what loans should you accept. In one sense, there are no bad loans, just unfavorable terms for you at a given time in your life. It is up to you to get smart about when it is best to take out a loan, and for what terms. As a student, this can be difficult, as your choices are somewhat limited. That said, you still have choices.
Private Student Loans
Everyone knows about the federally backed student loans that you can get by filling out 5” of student loan paperwork. These loans are often associated with big names like Fanny Mae and Wells Fargo. But those aren’t the only sources of student loans that are available.
If you qualify, and are okay with the offered terms, you can get a private student loan. It is important to note that there is a difference between student loans and grants. Grants are free money that you do not have to repay. You just have to qualify for them. A loan, private or public, has to be repaid. The thing about student loans is they can’t be discharged in a bankruptcy. Until you pay it, that loan stays on your record forever.
According to Consumerist, “…student loan debt averages $29,000 for borrowers leaving school with a Bachelor’s degree.” We know that acquiring that degree does not guarantee a job. For all too many graduates, bankruptcy is their first, harsh, life-lesson. But some senators are pushing to make private student loans dischargeable in the event of bankruptcy. It might be an important consideration when choosing a student loan.
It is easy to get blindsided by unexpected costs when you are a student. There is a lot that is simply not covered by your student loan, or your parent’s credit card. What are you going to do when your laptop gets pinched, or broken beyond repair? You’ve still got classes to attend, and papers to write. You don’t have time to save up for a new one. You need a good laptop right now.
A bank is probably not going to lend you $1,250 for a new Macbook no matter how much you need it. Your friends don’t have it. At least, that’s what they tell you. A solution they might point you to is a socially networked source like the MaxLend Loans LinkedIn page. They are one of several online sources that make it easy to obtain a situational loan. Although they have been around since 1975, you will still need to carefully read all terms and conditions to make sure it is right for you. The overall message from the MaxLend Loans blog is:
Just because you’re short on funds doesn’t mean you’re short on options. MaxLend can deliver up to $1,250 to your bank account in minutes!
The key to situational loans is be prepared to pay them back quickly.
Finally, there are credit cards. Just remember, the people who tell you to pay them off and cut them up have used them to great effect at some point in their lives. So can you. Remember, there are no bad loans. There are, however, irresponsible borrowers. Borrowing more in a pay period than you can afford to pay back is irresponsible no matter the loan. The only problem with credit cards is that they make it easy to spend money without feeling like you are spending money. Just remember: abusing a credit card in school has dire consequences down the road.
At the end of the day, it is not about smart loans; it’s about smart students.