Want To Buy A Home? Know Your Student Loans

Higher Education Borrowing Can Impact Mortgage Lending

By Isabel Giles

Heading off to college for the first time this September, students might be thinking about their first courses and grade point average goals. They also might want to think about the first home they will buy -- even if it is years away.

Isabel Giles

Isabel Giles

Not that college is unimportant, but students need to know that loans that pay for their higher education can negatively impact their credit scores if not managed properly.

Circumstances vary as to why someone falls behind or fails to make good on their college loans.  Employment could be a problem. Others, whether they have graduated or not, choose to make their student loan the last of their bills to consider paying.

One thing is certain: If you fall into default on a student loan your credit score can be damaged, making lenders reluctant to provide a home loan. Your chances of getting a mortgage are slim if encumbered with a federal government lien. The fallout extends further. Some companies may not hire you if you have a negative credit report, diminishing the chances of working in the field you studied. The government can also garnish salaries or your tax refund to cover your unpaid student loan.

So, what can you do to head off student loan issues?

Examine how many opportunities are in the profession you aspire. Ask yourself, “Is it worth it to me to borrow $80,000 for a career that has few jobs?”

You may also want to consider starting out at a community college where transferable credits on baseline courses are available much cheaper than the same classes offered at a state university or private college.

There are other ways to cut the cost of getting through college, some less painful than others:

·       Some colleges will allow you to work at the school, covering the cost of some of the credits;

·       Explore organizational scholarships that often are underutilized;

·       If feasible, live at home initially if you are uncertain what your major will be. It avoids costs from renting a dorm or an apartment;

·       Investigate types of loans available. Subsidized government loans are available without accruing interest during the period you are enrolled. Other loans, including federal loans, can accrue interest while you are in school. The difference can be very significant.

In some instances, a federal loan is the preferred loan because it can protect you – and your credit score -- in the event of full disability. There are other Loan Forgiveness qualifications a housing counselor or expert financial counselor can help you identify.

If you have graduated from school and want to buy a home, and have student loan issues, schedule a meeting with a Homeport housing counselor. We can review loan repayment options and create a better monthly budget. Call 614 221-8889 or visit our web site.

(Isabel Giles is a Loan Program Manager at Homeport)