4 Disadvantages of Student Hardship Loans

Student hardship loans are available to students who have exhausted other loan options but still cannot afford the cost of school. The loans do not only apply to tuition. You can use these loans to meet living expenses, purchase books and other needs. While these loans are in place to help students in dire straights, there are a number of disadvantages that make them undesirable, other than as a matter of last resort.

#1 You Must Repay the Loan

There is no such thing as free money with a hardship loan. While there are a number of grants you may apply for, a hardship loan is not a grant, and it therefore must be repaid. Many students fall into the idea that they will easily be able to pay off their loans once they graduate and start working. However, there is no guarantee of a salary right after graduation. Furthermore, starting salaries can be very low, making simple loan payments hard to manage in the first few years.

#2 Interest is Still Charged

Interest makes every loan exponentially more expensive. While interest rates on subsidized loans are typically low, you will still need to pay some interest to compensate for inflation. Ultimately, borrowing a dollar today means you will pay back much more tomorrow. Again, it is easy to think you will be able to pay this off once you start working. However, it is not uncommon for people to be paying off this debt well into adulthood. To pay off tens of thousands of dollars in debt, you must make enough money to meet day-to-day requirements and basically have the extra income to allocate toward loans. Few jobs will give you this opportunity until you are much more advanced in your career.

#3 Qualifying is Difficult

These loans are truly available only to assist students who do not have other options. To qualify, you must prove you have exhausted all of your potential to take on other debts. You must also prove there is an immediate financial need that will be met by this additional loan. If you are able to pick up work study hours at your school or cut back on your class hours, your school may not approve your hardship loan. It is ultimately up to your school to decide who the neediest students are.

#4 You Can Only Qualify Once

Once you use this option, you can never use it again. You need to think very carefully about whether you are truly at wits end with this choice. If you are not, then you will be throwing out your life raft before the ship actually sinks. Many students today can feel intense financial pressure to meet the fiscal demands of getting a higher education degree. This stress can cause you to feel you are out of options. Try speaking with a counselor at your school about your options before you move forward with this drastic step.

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