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Generally, it depends on whether taking on that debt is a good investment. Good debt typically earns or saves you money in the future. For example, taking out a low-interest loan to pay off high-interest credit card debt might be considered good debt because you’ll save money on interest.
Bad debt is debt that isn’t worth the cost. For example, borrowing for a trip you could have saved up for could be considered bad debt since you’ll pay a lot more than you needed to and get nothing in return.
Student loans are often considered good debt because they make it easy to reap the benefits — namely building your credit and investing in your future — without the cost or risk that comes with other types of debt.
Here are a few reasons why many experts consider student loans good debt:
You can make sure your student loans remain a positive investment a few different ways:
You don’t have to follow all three of these steps to benefit from student loans. If you go into a low-paying filed like public service or the arts, paying off your student loans according to your repayment plan can still build your credit. It just might cost you more than if you decided to work in finance.
Student loans come with less risk than most other types of credit — but that doesn’t mean there’s no risk at all. Here are a few ways they can negatively impact your credit score:
Here are a few ways to avoid falling behind on your student loan repayments:
Student loans might come with a higher return on investment than other types of debt, thanks to low rates — and the fact that you need a college degree for many jobs. But they can still hurt your personal finances if you miss repayments.
If you’re struggling to make repayments, compare refinancing offers to extend your loan term or potentially qualify for a lower rate.
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