Student loans are the largest form of student aid today and account for up to 54 percent of the total aid awarded to students every year. A student loan is often the only way students can afford to pay for the education they need. However, with the cost of college and graduate school rising astronomically many students are forced to take on more and more debt. Repaying these debts after graduation becomes a major problem for most students. Even if they get a good-paying job, they are starting their independent life with a huge financial burden.
Think Before You Borrow
Student loans are easy to get, but they come with certain consequences attached that students don’t always realize until it’s too late and they are overwhelmed by the burden of debt. So it’s very important that you consider some steps that will help you lower or manage your debts.
Here are come tips that will save you money in the long run.
Falling Into the Loan Trap? Oops! Avoid it!
You may be tempted to borrow the maximum amount you are offered or are eligible to borrow. Oops! You could be falling into the “loan trap!” It’s so easy to do — You just accept the maximum loan from the student loan lending company or institution or bank, just in case you need it. Student loans don’t require payments while you are in school full-time working on your degree. And it’s very easy to ignore the future and consider how you’re going to repay it. Remember lenders want you to borrow the maximum, so they can make more money off you. They are betting that you’ll graduate and get a good job and be paying them back for a long time. So do what’s best for you — avoid the loan trap!
Reduce Your Loan As Much As Possible
Before you apply for a student loan, make out a budget. List all your necessary expenses and allow a little for extras. Also list any other income you expect to get, such as scholarships or help from your parents.
Ask yourself, if you can cut your expenses and increase your income. Can you get a part-time job, either during the school year or at least during vacations.? Can you get a scholarship? Do you have any savings you can use?
Then, think about how much you really need to borrow. Remember, you don’t have to borrow the entire amount that was awarded to you. Just borrow exactly what you need. Anything you can do to minimize spending or to make money, will decrease the amount of money you have to borrow to get your education. Every dollar you can reduce up front will save you a lot of money later. Because the interest on loans is compounded and can really add up. Also your monthly payments will be lower which will help you manage your finances when you are just starting out.
Look For Student Loans With The Best Terms
Even a little lower interest rate, can make a big difference in the total amount of money you’ll have to repay over the years. This is because of the the power of compound interest.
Here are some sources for student loans:
Federal Student Loans
- Federal Perkins Loans
- Federal Subsidized Stafford or Direct Loans
- Federal Unsubsidized Stafford or Direct Loans
Alternative or Private Loans
Most student needing a loan have access to special loan sources such as the Air Force Aid Society. These loans often have terms that are comparable to the Perkins or Subsidized Stafford or Direct loans. It may be worth while to investigate the possibilities. There are a lot of sites on the web you can use to find information but one of the best tools is the College Board’s online Scholarship search. Also, check with your school’s financial aid office. They will have a lot of helpful information and can steer you in the right direction.
Parent Loans
Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.
Many colleges also offer loan programs for parents. Before you submit a PLUS loan application, check with your college’s financial aid office to see what type of help they offer and if you qualify for a loan from them.
