You’re 18. You just got into college. You’re dreaming big – doctor, engineer, teacher, entrepreneur. To get there, you’re told, "Just take out a student loan. Everyone does it."
Student loans are money you borrow to help pay for college or career school. You use the money now, and pay it back later, usually with interest.
Before we go any further, let us make one thing very clear: This is not free money. Old Glory Bank will never advise taking out any loan that you can’t afford to pay back. A student loan (federal or private), spending on a credit card, a car loan, or lease ... if you borrowed it and you owe it, you pay it back. Period. But sometimes life happens.
1. Federal Student Loans
These are loans from the U.S. government. They can seem appealing because:
Examples:
Direct Subsidized Loans (for students with financial need; the government pays the interest while you’re in school)
Direct Unsubsidized Loans (available to most students; you’re responsible for the interest)
2. Private Student Loans
These come from some banks, credit unions, or other lenders. They:
Interest is the extra money you pay on top of what you borrowed. It’s how lenders make money. For example, if you borrow $10,000 and your interest rate is 5%, you’ll owe more than $10,000 when it’s time to repay, based on how the interest is calculated and how long you take to pay the loan back.
Any student loan may seem like free money now, but they can actually add up to tens of thousands of dollars that you will spend the next 10 or 20 years repaying.
Which type of loan is better? We can’t answer that for you. Every student’s situation is different.
→ First, ask yourself if you really need a loan at all? Do you have other options that can help you avoid graduating from college with debt?
→ Can you choose an in-state school with lower tuition than an out-of-state or private school? What about a trade school?
→ How about doing a year or two at an affordable community college for your core classes, and then transferring to your preferred university to finish your degree?
→ Can you choose a college close by, where you can live at home and commute to save on room and board? Even doing this for just one or two years can make a big difference.
→ Are you eligible for scholarships or grants?
→ Can you get a job on campus through a work-study program to offset tuition costs? Or work full-time during the summer months and school breaks to build up your bank account?
→ Consider Employer Tuition Assistance. Some companies will help pay for college if you work for them during or after school. What about military or apprenticeships to help with school costs?
→ Still in high school? Consider Dual Enrollment, AP, or IB classes. Earning college credit during your high school years is often free and can shorten the time you spend in college. Fewer semesters = less tuition = less debt.
Will the degree and career you want to pursue likely earn you enough income to balance your college costs?
If you want to be a teacher, you may not be able to justify $80,000 in student loans. But if you want to be a neurosurgeon, it may not be a big deal to take out a small $10k loan each year since you are likely to earn enough to pay it back quickly. Just remember that life doesn’t come with guarantees.
Before you sign your name on the dotted line and commit to decades of debt, take a moment. Let’s break down what you’re agreeing to.
Federal student loans come with legal strings that make them very different from almost any other kind of debt.
Most importantly, borrow only what you need. Don’t be sucked in by big dollars dangled in front of you.
1. You Can’t Easily Walk Away from This Debt
Most debt, like credit cards, car loans, or even medical bills, can be discharged in bankruptcy if things go south.
Student loans? Not so much.
Federal law makes it nearly impossible to erase student loan debt in bankruptcy unless you can prove "undue hardship", and that’s a tough case to sell. You basically have to prove you can’t maintain a minimal standard of living and that your situation isn’t likely to change.
Let that sink in: even if you go broke, student loans stick.
2. There’s No Expiration Date
Ever heard of a statute of limitations? It’s the legal time limit for collecting a debt.
Not with federal student loans.
The government can come after you ... forever. There is no time limit. You could be 68 and still getting collection calls over a loan you took out when you were 18.
3. They Can Take Your Paycheck Without Suing You
Most creditors have to sue you before they can garnish your wages, which means taking money out of your paycheck before you even receive it. The federal government? They don’t need to.
They can take up to 15% of your disposable income through what’s called Administrative Wage Garnishment, and they don’t even need a court order.
4. They Can Take Your Tax Refund and Social Security
Default on your loans, and the IRS can intercept your tax refund, even that refund you were counting on to pay rent or buy groceries. In some cases, they can even dock your Social Security in retirement.
Yep, they play the long game.
5. Defaulting Can Jeopardize Your Career
Some states (though this is changing) allow the suspension of professional licenses if you fall behind on student loans. Think: teacher, nurse, electrician, etc.
Want to work in a government job or apply for a security clearance? A defaulted loan could stop you.
6. Marriage Changes Everything
Getting married? Your spouse’s income may be counted when calculating your payments under income-driven repayment plans. That could make your payments skyrocket or affect your eligibility for forgiveness programs.
Your wedding day could come with a bigger bill than you expected.
7. Forgiveness Is Rare and Complicated
There are programs like:
Public Service Loan Forgiveness (PSLF): Work for a government or nonprofit job for 10 years and make 120 qualifying payments.
Income-Driven Repayment Forgiveness (IDR): Make payments for 20–25 years, and the rest might be forgiven.
Borrower Defense to Repayment: If your school lied to you or defrauded you, you might qualify for forgiveness.
These may sound tempting, but the rules are complex, the paperwork is endless, and historically, many borrowers have been denied even after jumping through hoops.
Again, we will restate that Old Glory Bank’s position is that taking on a debt means committing to repaying it unless it becomes absolutely impossible to do so. Don’t borrow, thinking you can take an easy way out later.
They’re easy to get, but hard to escape. Don’t fall into the trap of thinking “everyone does it, so it must be fine." You are not just borrowing money. You’re signing up for a legal obligation that can last a lifetime.