Why Taking Out a Loan to Pay For Your Schooling Is a Smart Choice

• Author: Jenny Wolff
• Posted: 2026-01-15

Student loans allow many students to obtain the education and training necessary to enter their desired fields. There are many types of federal student loans, with different interest rates and repayment plans as well as private loans from banks and other lenders. The types of repayment plans available make it possible for students to begin repayment of their loans as soon as they start school.
 

1. Lower Interest Rates

Student loans have lower interest rates than many other types of loans. Whether a federal or private loan, the interest rate is around 4%, considerably less than the interest rates on credit cards and some auto loans. This lower interest rate allows students to pay back their debt while in school rather than worrying about when they can begin making payments. The repayment options are flexible enough to allow you to repay your loan over time, depending on your financial situation and job prospects after graduation.
 

2. Lower Fees

When you make a loan payment, banking fees can be a considerable expense, and student loans often have a lower origination fee than other loans. This is especially true for federal loans, which provide interest subsidies on some of their loans to ensure low-interest rates for students who qualify. By offering lower interest rates and fewer fees, student loans make paying back the loan less expensive in the long run.
 

3. Fast Access to Higher Education

Most students can start repaying their student loans while they are in school though some private lenders may require that you have a job after you graduate. Either way, student loans allow you to save up money faster than if you were using another method of saving for your education. Student loans are also very flexible, enabling you to adjust as your career or financial situation changes.
 

4. Flexible Repayment Options

Federal student loans have many repayment options that allow you to choose the repayment option that will work best for your financial situation and future goals. Federal loans have different repayment plans for students at different income levels, and you can choose the most appropriate strategy for your situation. You can also choose between a money-purchase repayment plan, where you prepay your student loan in full and pay relatively high interest, and an income-driven repayment plan, where interest rates are less than other types of student loans.
 

5. Income-Based Repayment Plans

Under federal income-based repayment plans, student loans have monthly payments based on the amount of your discretionary income. Understanding how much of a monthly payment you can handle is essential. This allows you to make sure you can pay off your student loans on time even if your career needs to provide a higher salary to qualify for repayment in full. Income-driven repayment plans also let you adjust your payment amount if there are changes in your financial situation. You can make payments more quickly if you make less money over time.
 

6. Loan Consolidation

Suppose you are a graduate student who is eligible for a federal loan. In that case, you can consolidate your remaining student loans into one single loan, providing you with additional repayment options and making it easier to manage the amount of money you owe each month. Consolidation can also help many graduate students manage tuition expenses by providing them with a lower monthly payment if they remain in school longer than the standard enrollment period.
 

7. Reduced Payment Plans

You can access a reduced monthly payment plan by consolidating your loans into a new loan or ensuring that you are repaying a student loan from the same institution. If you have more than one type of student loan, this can reduce the amount of money you owe each month by allowing you to combine different types of loans into one payment. This will make it easier for many students to pay off their student loans quickly, enabling them to move forward in their careers and financial lives.

The advantages of student loans are many, and for many students, a student loan can be a great way to obtain the education and training necessary to get into the career you desire. The first step is determining your financial situation and determining how much you can afford to borrow. If your budget allows, you consider pursuing federal loans with lower interest rates and fewer fees than private loans.