March 16, 2022 at 11:01 am

Should I use my savings or take private student loans to fund my degree?

Should I use my savings or take private student loans to fund my degree?

Wondering how to pay for college with no savings? Few people have enough money in savings accounts to pay for their international masters tuition outright.

The majority of international grad students have some savings and should continue reading even if you don’t have enough savings to pay for university.

The question may become relevant while preparing your international grad school finances or while you’re in the online payday loans Escondido California repayment cycle of your student loan.

Is it smarter to use savings or a private student loan?

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Should I take a student loan?’ is a thought which plagues many masters degree applicants. You might want to use the money you’ve saved, or you might want to consider some of the best student loans for graduates. The question of taking private student loans or using savings to pay for your masters degree resembles a much more common question:

Use a parallel example to view options

You’re likely paying around 18% per month on the credit card and earning something closer to 2% on your savings.

There’s a reason for savings accounts; you want a secure home in a safe neighbourhood, or you want a buffer in case you lose your job. There are countless reasons and motivations.

Taking out student loans for grad school is something countless people do, but each case is unique and you need to assess your own scenario before you consider what to do.

This isn’t a black or white question with a choice of two answers. There is plenty of grey area in the middle; you don’t need to use all of your savings to pay off all of your debt.

Throwing $5000 from the savings account towards the credit card would reduce the interest (at a theoretical 18%) down to $180, and while this would only be earning $20 on the savings account, you’d be saving $800 a month.

These equations are never that smooth. There are complexities and accumulated interest, and maybe you need to dip into that $1000 because you need to replace the brakes on your car.

Priorities determine the use of savings or international student loans

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We can’t tell you, even in this hypothetical situation whether you should put $4000, $4500, or $5000 towards debt. We won’t even tell you whether you should put any of your hypothetical savings towards debt.

Maybe you need that money in the bank because job security isn’t the best at the moment. ily member is ill.

Whether you would keep your savings or pay off your debt is totally up to you. It’s entirely possible that you won’t sleep well without a large cushion in the bank. Or, maybe, the debt is keeping you awake at night.

The point is that it all boils down to your priorities and the actual figures you have in front of you.

Imagine you’ve been admitted to your dream school and they’ve even awarded you a generous scholarship package. Imagine, too, that your company is willing to sponsor a chunk of your tuition and your parents can’t wait to gift some money towards your international degree.

Sure, this sounds rather too good to be true and for most students, it usually is. But, just imagine that, after piecing together all of these funds you have a choice of using $15K in savings or borrowing the same amount in private student loans. Which is the better option?

The obvious and immediate answer would be to look at the figures and work out some calculations as we did with the hypothetical credit card debt.

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