Is it better for student to take a loan or to save money - Case Study Example

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They need money to buy books, conduct research, upkeep, travelling among others. However, small or lack of income makes them look for money from other sources. Among the options available…
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IS IT BETTER FOR TO TAKE A LOAN OR TO SAVE MONEY? are always in need of money because of the many activities theyare involved in. They need money to buy books, conduct research, upkeep, travelling among others. However, small or lack of income makes them look for money from other sources. Among the options available to them is a loan. Additionally, some also resort to personal savings. However, it is not good for students to take loans but save money for their upkeep.
One of the justifications for the student not to take a loan is because it is expensive (Shen 2010). The cost of education is very expensive, and these make students adopt a considerable amount of money in the form of loans. Tuition fee takes the greater share of the loan before other expenses such as books, housing and this is a huge burned to the student. In some cases, the loan increases when the student has to repay with interest. This tends to be cumbersome for any student since it accumulates to the extent that it becomes difficult repaying. Economists argue that student’s loans should be interest free and subsidized to facilitate recovery (Christie 2015).
Secondly, repayment of student loans can last for many decades, and it becomes a burden to the student (Shen 2010). It ties a student in a debt for a longer period hence can miss many opportunities that come to those who do not have debts. Economists argue that it makes it hard for students to build up an emergency savings account, and they cannot save money for retirement (Christie 2015). This is mostly in cases when a student has to pay the loan for a longer period of 15-25 years. Students who save do not have such burdens and are relieved.
Thirdly, taking a loan can run a student’s credit history (Shen 2010). Students who default to pay their loans stand higher chances of blacklisting hence unable to get employment or borrow money from the financial institutions. Similarly, inability to pay the loan within the stipulated time harms the students because it affects the credit history making it prolongs the expected duration of clearance. Thoma (2015), an economist argues that student should not take loan they are unable to pay because it puts them into unintended debt.
Additionally, student loans must be repaid with or without graduating (Shen 2010). This is very dangerous to students who do not graduate and lacks job opportunities. It forces them to look for the money elsewhere, hence putting pressure on them. Thoma (2015) notes that it becomes hard for people who do not have a stable income or earning less to repay such amount because their income is not enough even for themselves.
Despite all these, student loans are necessary for making students complete their studies (Shen 2010). It gives one an opportunity to complete school and then search for money to repay. Hiltonsmith, who is an economist argue that students who are unable to assess loans have minimum chances of attending colleges for personal saving is not always enough to make one complete school and buy all the requirements (2015).
From the above economists view, it is not good for students to take loan instead save. Only one economist supports students to take loan. Therefore, students should use the little saving they have and complete their studies.
Christie, H 2015, Student loan debt is preventing millions of Millennials and Gen Xers from
buying their first homes -- and that is having a big impact on the housing market.
Available from
buying/ [ March 7, 2015]
Hiltonsmith, R 2015, How students debt reduces lifetime wealth. Available from
[March 7, 2015]
Thoma, S 2015, Students loan deliquesce rate defies overall downward trend. Available from
rate-defies-overall-downward-trend.html [March 7, 2015]
Shen, H 2010, Advantages and disadvantages of students loans repayment patterns. International
Education Studies, 3(1) pp. 45-49 Read More
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