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Student loan debt is a harsh reality for millions of graduates. The amount of student loan debt graduates leave school with surpasses $30,000 on average, and it’s leaving grads in a tough situation. Many post-graduate jobs require students start at the bottom with a modest salary. While this might not sound like a problem for some, the idea of starting life with a modest salary and ample debt is intimidating. College grads are ready to begin their adult life, which often means purchasing a house. Should you buy a home with student loan debt to consider? There is no right or wrong answer, only answers that apply specifically to each graduate.

Student Loans

Federal or private, student loans will bury you in debt if you’re not careful with them. There are positives and negatives to both. In general, it’s federal loans you should take out if you can. These loans are regulated by the federal government. There are programs available to recent graduates on a tight budget. These repayment plans are available to anyone, and they’re income-based in many situations. Some even cap out at a certain point and so many years while you repay as much as you can, which is sometimes listed as $0 for many income-based plans.

Private loans are stricter. Banks want their money repaid, and many don’t consider alternatives to student loan repayment. This leaves many borrowers in default, which can end in wage garnishment, lawsuits, and more. In some cases, private student loan lenders write off your debts after so many years, and you’ll receive a 1099 in the mail and pay taxes on that as if it was your income. It greatly affects your credit.

Grants

If you can apply for grants and/or scholarships when you go to school, it’s a far better situation. There is very little you must do but apply for these, and it’s a simple task. Once you have this money, you can use it to pay for your tuition, and you never pay it back. You can graduate without going into debt, and you can buy a house with the income you’re earning once you get into the workforce with that new diploma.

Grants are available everywhere, and almost anyone can apply for them. Federal, state, and local grants and scholarships are always available to those who want to see their future look brighter. A good rule of thumb is to spend time applying for all grants and scholarships so you can get as much free money as you can for school. The worst you can do is be denied a grant, but it’s better than taking out another loan.

Buying a Home

Now that it’s time to buy a home, you simply consider the factors at hand. You need excellent credit to get the lowest rates, which is what allows to afford more home. You need a low debt-to-income ratio to qualify for a larger mortgage with a lower payment. What you can afford depends on what you can pay for, and your debt is what tells lenders how much you can afford.

If you have significant debt and a lower income, buying a home isn’t a wise decision. If you want to make affording a home more affordable, your best option is to pay off as much debt as possible before applying for a mortgage.

Paying Off Debt

Significant debt doesn’t allow for a great credit profile, which doesn’t allow for low interest rate approval. To ensure you’re getting the most for your money, see if you can pay off as much debt as possible if you’ve already accumulated it. Many consumers spend a year or two living with their parents while they work after graduation so they can use their income to pay down their student loan debts. Once these debts are paid, it’s easier to apply for a mortgage with better terms.

Staying out of debt throughout college is better than applying for loans and graduating in debt and unable to care for your future. Don’t take out more loans than you need to afford tuition, work for your money, and see about scholarships and grants. Student loans should always be a last resort rather than the first option when it comes to paying for school.