Borrowing Student Loans Responsibly
As you may know, student loans are today’s largest form of student aid. Researches have found out that it made up to 54 percent of the total aid awarded every year. However, with the rise of student loans, several cases of student loan defaults occur. The student loan debt is even today’s one of the major problems of most student borrowers. It is rising every year and the college expenses as well as the graduate school costs have definitely gone up faster than inflation. Well, let me tell you that this case often surface when you take a particular loan then another student loan followed by another loan. It is often said that as much as you take student loan offers, your loan debt gets bigger and bigger.
Since the case for student loan debt always happens and it carries certain burdens to the attainment of the student’s dream of higher education, it is then important that you consider some steps that will help you lower or manage your debts. Perhaps one of the most necessary things to consider is to borrow loans responsibly.
Think Before Your Borrow
Many people find it easy to rush through the student loan process. However, if you take a minute considering some of the money saving tips mentioned below, you could save yourself some bucks in the long run. So, read on.
Falling Into the Loan Trap? Oops! Avoid it!
Most of the time, you may find it tempting to borrow up to the maximum amount. Well, this is what many people call as the “loan trap”. It is the case where you borrow the maximum amount of money from the student loan lending company or institution even if it is more than you can afford to repay. It often occurs for the fact that need-based loans are very easy to apply for and they don’t usually require payments while you are attending your degree. So, to avoid certain consequences as you enter the repayment period, you should avoid the loan trap.
How Much Loan Do You Actually Need
Before you consider borrowing a student loan for your college, think first how much loan you really need. Always note that when taking out student loan, you don’t have to borrow the entire amount which is usually specified in your award letter. Just borrow what is enough.
Reduce Your Loan As Much As Possible
There are several options available for student loan borrowers. But, before opting for one, it is necessary that you question yourself if you can hold down the expenses; if you can work more, either in the academic year or during vacations; or if there are scholarships available for you. It is often said that if you minimize spending or bring in more money, the amount you have to borrow for your education tends to go down.
Consider Student Loans with the Best Terms
Note that the lower the interest rate, the less pricey the student loan is. This actually means, the less you will have to repay for your student loan debt.
For your own sake, here is what your batting order should be (from the least expensive):
Student Loans
1. Federal Perkins Loans
2. Federal Subsidized Stafford or Direct Loans
3. Federal Unsubsidized Stafford or Direct Loans
4. Alternative or Private Loans
As you may know, most of the students thinking for student loans have access to a special loan source these days. These sources, like the Air Force Aid Society, have student loans terms that are comparable to the Perkins or Subsidized Stafford or Direct Loans. Of course, it may be worth your time to look into the possibilities. There are some sources these days that offer low-interest student loan programs, and perhaps one of the most resourceful is the College Board’s online Scholarship Search.
Parent Loans
- Federal PLUS Loans
- Private Loans or Alternative Loans
As
mentioned, there are two available forms of education loans for parents. These programs are what commonly offered by
some colleges anywhere in the world.
But, for great chances of availing the benefits of such programs, it is
best to check with your financial aid office to see if the school you wish to
attend offers its own loan program. This
will also allow you to know if you qualify for the loan, before you submit a
PLUS loan application.
How Much Should You Borrow?
Many
experts agree that you should borrow only as much as necessary. As
mentioned earlier, it is often tempting to borrow whatever you are offered or
are eligible to borrow. However, it is
necessary to think first carefully about hoe much you really need, as well as
to consider other possible options.
Always
note that there is actually no need for you to borrow the entire amount shown
in your award letter. And, even more
important is that, never plan to borrow as much as you can up the yearly limits
because if you do so, expect yourself to be deep down in debt.
Consider
Options That Will Reduce Your Loans
If
you are thinking for borrowing money to support your education, try to ask
yourself first if you have savings left that you can use instead of taking out
a student loan from the school of your choice.
Also, think if you can get by with less by way of holding down expenses,
or if you can do something great, like working more, either in the academic
year or during vacations just to support your education. Also, think for the possible scholarships
that you can apply for, or you can be qualified for. There are actually a lot of options left for
you out there. The best move to take now
is to know and understand them.
Estimate
Your Loan Payments
It
is worthy to note that the more you borrow for your education, the higher is
the amount of your monthly repayments will be once you finish your degree. So if possible, try to estimate your loan
payments. There are a number of student
loan repayment calculators out there that you can use to do the math. What’s more, you have the chance to
calculate your monthly payments based on the estimated starting salary of your
chosen occupation.
The Essential Borrowing
Tips
Now
that you have pondered enough about your student loan with the things you have
to consider before borrowing, as well as with the amount you need to borrow, I
guess it is now important for you to look at the most recommended tips for
borrowing student loans. Just consider
the following:
1. Start by looking at the award letter
given to you by your servicer. From the
letter, figure out which need-based loans you have been qualifies for and for
what amounts.
2. After looking at the full financial
picture, such as the awarded aid, education cost, and family share, you should
then consider settling on an amount that you actually need to borrow.
3. The rule is: never borrow more than you
need. Always note that as a student loan
borrower, you are not required to take the full amount of the loan you have
been offered.
4. Don’t ever forget about student
employment as an alternative for borrowing.
Even though working at a job can seem like an extra burden for students,
so is struggling with high loan repayments after college.
5. Apply for the student loan right
away. This is very necessary especially
if you want to ensure that the loan is approved as well as the money paid to
the college before you have to make your first student account payment.
6. The key to successful application is to
follow the loan application instructions carefully. Note that any mistakes you make will delay
receipt of the funds.
7. When you are applying for a Stafford or Direct student loan, be prepared for the
amount that is paid to the college to be less than the amount you signed
for. Usually, a fee of up to four
percent will be deducted from the student loan.
This deduction occurs before the check is sent to the college of your
choice.
8. If you already figured out the exact
amount you are borrowing before any borrowing process begins, you should start
keeping track of your student loan tab, which is what your monthly repayment
amount will be after you graduated from college. There are student loan calculators out there
than can do the math for you.
9. If instances occur that you find yourself
needing more than the amount that’s been offered in your award letter, it is
necessary to contact with a financial aid counselor before taking on an
additional loan.
10. And, if you do take on an additional,
unsubsidized loan, just consider making interest payments while attending your
degree. The interest won’t be much and
this will help you save money. If you
delay or capitalize the interest payments, you will end up having to pay back
significantly less than.
As mentioned,
planning and thinking your moves for taking out student loans is very necessary
for a successful borrowing. If you do
consider what have been mentioned above, then there is no doubt for you not to
attain your dream education, and even a successful career in the future.