Why Are Student Loans so Important

Since the cost of undergraduate, graduate, and professional education continues to increase, students are taking advantage of low cost federal student loans. According to the Project on Student Debt and the College Board's Center for Economic and Policy Research, about two-thirds of recent graduates carry student loan debt and over the past decade, student debt levels have more than doubled.

These figures proves that many students start their careers with significant debt before they've had a chance to build a solid credit score. Since public academic institutions continue to face budget cutbacks and tuition increases, students may have to rely more heavily on student loans and credit cards to get by; this can have negative consequences for students' credit scores and may even delay or divert career plans.

Career Transitions and Your Credit Score

If you're taking in consideration a mid-life career change, a good credit score can help you receive financing for the transition to a new career. It's good to weigh short and long term financial goals when considering taking on student loan debt. Consulting a financial adviser can help structure a plan to fund your career transition while protecting your credit score.

Understanding Student Loan Debt

Unfortunately, it can be tempting to borrow more than you need for educational expenses. And it is easy to neglect that unlike grants and scholarships, student loans must be repaid, which can cause financial problems and damage your credit before you even have a chance to establish a good credit history. Late payments and collection activity on student loans leads to low credit scores--especially if, like most students, you have a short or limited credit history. A low credit score can limit the availability of some student loans and other types of credit including mortgage loans.

The Connection between Your Credit Score and Career

A spotty credit history can not only make it hard for you to get approved for loans, it could even ruin your career plans. Low credit scores can limit access to business loans and prospective employers often conduct background checks that include verifying your credit score. When you interview for jobs you may be asked to sign an authorization that allows prospective employers to check your background. Employers in the financial and retail industries and professions such as accounting and law typically use background checks as part of the hiring process, and a low credit score is a valid reason to deny employment.

Careful use of student loans can provide for your education and help avoid unnecessary debt. Managing student loan debt through prompt repayment and possibly consolidation can help establish a good credit score. Your education and credit score can open doors to your new career, and later, help you get financing for expanding a business, starting a company, or investing for your future.

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