Working to pay off tuition is becoming increasingly popular among college students. In the past, students would get student loans to help pay for college tuition. While this is a viable away to meet the demands of high tuition, student loans do have their drawbacks.
The main problem is that student loans can drag on for years after a student graduates. It is hard enough trying to make your way after you graduate without having a significant portion of your earnings taken up with student loans. In addition, having an outstanding student loan can make it more difficult to apply for an apartment, credit card, or other type of loan. This is especially true if you miss a payment, which will affect your credit rating.
These are all the darkest possible circumstances regarding student loans, but they should be mentioned. A work study program in which students work and pay off tuition while still in school is becoming increasingly popular. In effect, students will pay off student loans in real time. Instead of being saddled with student loan payments that will come out of future paychecks, students work their way through college.
The set-up is similar to a student loan. A student gets a select amount of money to put toward tuition. Unlike a scholarship, which is “free money,” the student has to then work off the grant. This is preferable to a student loan because it will be paid off by graduation.
However, with tuition on the rise, work study programs will not always cover the entire tuition, just a portion. It still may be necessary to apply for separate student loans and scholarships. Even so, the amount of a student loan will be severely diminished if included with a work study program.
One misconception among college students is that you can only participate in one kind of program. Certain programs do have restrictions, but it is possible to get a scholarship, student loan, and participate in a work study program. If a scholarship only covers $2,000 of tuition, you may need to explore other avenues as well. At the same time, if you default on student loan payments, you may be ineligible for certain work study programs.
Remember that much of student loan payments go to interest—especially for young, high-risk borrowers who will likely have high interest payments. Interest is basically lost money—it does not go towards paying off the loan. The higher the interest rate, the longer an outstanding student loan will last. It is imperative that you combine student loans with other types of payment plans in order to not be saddled with high student loan payments long after you leave college.
Work study programs do not have the same problems with interest. Normally, you will have a portion of the tuition pre-paid, which you then work off. You will not have to pay extra for interest, but instead your paycheck goes towards paying off the grant. If you need extra spending money as well, you may need to get another job or save a portion from the work study program—if the program allows you to pay a set amount every month.