Personal Finance: What College Students Need to Learn About Loans

student loans

As a college student, there will be circumstances that you will run out of budget or your resources are not enough to survive the whole semester. There are ways you can borrow money to pay your college fees, including your tuition and accommodation. You make informed financial decisions on your own, based on your knowledge, and with confidence. These loans can greatly help you financially when you are in your college, and it will also lessen the amount and hours you will spend working while still a student.

You need to thoroughly understand the basics of borrowing because it will make your college life more manageable. It will allow you to be more financially responsible and knowledgeable about money management, borrowing, saving, planning, and investing for the future. This small step during college will help you spend your salary wisely when you start working.

Here are ten reasons why college students need to learn about loans:

1. Loans Are Used by Some Students to Study

A student loan is an amount of money that the federal or state government, or a private company, gives a student to use for their tuition or other expenses at school. When you know how this works, how much you have to pay, the interest that it earns, and the terms and conditions of the loan, you can manage your finances steadily every month. These loans are typically provided to students who would want to attend college but are financially unstable.

2. Student Loans Have a Lower Interest Rate Than Personal Loans

The student loan has a lower interest rate than private loans, which means that the student loan will earn lower interest every month compared to a personal loan. This also means that you can pay for your student loans at a lower rate than the fixed rate of personal loans.

3. Flexible Payment Terms

Student loan provides flexible repayment terms and conditions. It also accommodates the money that a student earns and how much they spend daily. This also means that the interest is fixed—the amount of the interest on the student loan will remain the same even if the bank or private company has new terms and conditions for the loan.

student finances

4. Earn Money

When you are financially literate, you know how you can earn money. You will have an understanding of what can happen with the money you make. You will know your taxes, how much you have to pay for them, and how to save money from your paychecks. You will understand how you can generate money from loans and earn more profit.

5. Save and Invest

When you know how loans work, then you can study how money works with loans. You can be wiser about how you save your money, which investments will generate more income, and how you can manage your money to earn profit. Savings and investments will give you more options on how you can grow your money—knowing how every loan works will provide you with the best options for using your money.

6. Better Grasp on Money Management

Budgeting your money for your tuition, living fees, and other fees in college will prepare you for the future. You’ll know how much you can spend on specialty coffee while reviewing at your favorite coffee shop, clothes whenever there are events at your college, or the amount you will spend on your supplies at the dorm. You’ll know how to save, which is an essential habit when you start working in the future.

7. Start Investing Early

Knowing about loans and how it works can give you a better grasp and understanding in how money works. Getting a car loan for college is the same thing that you will do if you get that car loan for your dream car in the future. You can use your knowledge and experience in purchasing a car loan while still in college. You can even use your knowledge in acquiring your first home through a mortgage. And if you want to change your loan term, you can consider refinancing your mortgage. This time, you know how the contract will go and how many years it will take to pay off your mortgage.

8. Financial Responsibility

Financial responsibility will go a long way once you have learned that at a young age. You’ll know how to get a loan, pay your dues on time, and be debt-free in a short period. Also, you’ll learn how to save money, use it wisely, and invest in the future.

9. Repay Loans Based on Your Income

You have different ways on how you can pay for your student loan after graduation. You can pay it ranging from a 10-year plan to a 25-year plan, with varying interest rates for every plan. You can choose how you can repay the money that you used to survive college.

10. Protect Your Money If You Know How Loans Work


You can protect the money that you worked hard for after graduation. When you have a job and start paying your student loan, you have to be smart in spending your money. You can pay your loans and live an extraordinary life with your salary if you know how to manage your finances. You can be smart with your money.


Loans can be helpful depending on your capacity to repay. If you know that it will be hard to repay, it is best not to take any loans anywhere. But if it will help you manage your finances while still a student, be confident and make your loan more manageable for you to have financial freedom.


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