Getting accepted to your college or university of choice is an incredible first step towards your future! Congratulations!
Now that you’ve made that big decision of going to or going back to school, the fun starts. Loan decisions! Repayment may not be in your sights when applying for school, but it’s an inevitable result when taking out a student loan. If you know that in order to meet the expense of school you’ll need a loan, it’s important to consider the following.
The Fine Print
You’ll likely be getting many financial aid offers and who doesn’t like being offered money!? You have to pay close attention to the details of each and every financial offer you get. There is a multitude of different types of aid you could find.
Some must be repaid within a certain time, some require a certain number of credits per semester and some come with a hefty interest rate. Also, consider if the loan offers a grace period before repayment. Most federal loans will allow a grace period during school and even a few months after you graduate. Make sure you’re aware of when repayment starts – the last thing you’ll want to do is to miss your first payment.
Where is your loan coming from? Is it a private or federal loan? A federal loan will come directly from the government while private loans are funded from individual entities like banks or credit unions.
Credit Unions will offer student loan options that typically will have reasonable interest rates and flexible payment options. Research your options based on your need and individual situation. If you’re going back to school and already have federal loans in repayment – a private loan may be your best bet. This truly will depend on each student’s individual situation.
When it’s time to select a repayment plan, it’s tempting to select the lowest monthly payment. This may not be the best option. The shortest repayment plan requires a higher monthly payment but you will pay less interest overall. This is because interest is generated on your balance. The lower your balance, the less interest accrued.
Make a budget and figure out the amount you can realistically pay each month. Financial situations change and many times you have the option to change your repayment plan but start by making a realistic monthly payment that will pay down your debt sooner rather than later.
Borrow Only What You Need
Students may be tempted to take more loans out to cover costs outside of schooling. Consider getting a part time job or borrowing from a family member to avoid the interest that will accrue by taking out more than you need.
The more you take out the more you will need to pay back and based on interest rates – it could be more than you expect. By borrowing exactly the cost of schooling, you will have a shorter repayment period and in the end, you’ll be in less debt on the whole.