The ever-increasing cost of college tuition has forced many students and their parents to take out federal and private educational loans to pay for college education expenses. According to the Federal Reserve, Americans collectively owe about $1.27 trillion in student loans. In comparison, auto loans and credit card debt amount to $994 billion and $901 billion respectively. An estimate from MarketWatch reveals that the amount of student loan debt in the country increases by $3,055.19 every second.
Many college students don’t realize the responsibility they are taking on when they apply for student loans. This is usually the case because many students often have little understanding, maturity or experience in managing their finances responsibly. As a result, once they graduate from college, they find themselves staring at a massive amount of debt, wondering how they will ever get around to repaying it. Unfortunately, getting into debt is all too easy. But, getting yourself out of debt usually involves prudent financial behavior and loads of patience.
The Top Five Aspects to Consider for Getting Maximal Value from Your Student Loans
In this situation, ensuring that you’re getting the most out of your student loans becomes imperative. Stephen Dash highlights the five aspects you need to consider to get the most out of your student loans.
- Always Compare Any Financial Aid Offers You Receive: Many schools offer a variety of financial aid packages in an attempt to get students to enroll. These financial aid packages typically comprise scholarships, merit-based awards and need-based financial aid. In many cases, the financial aid package will vary from one school to another. Therefore, you must compare the tuition costs and financial aid packages offered by various schools. Doing so would enable to you to minimize the amount of money you will need to repay once you graduate. You could well end up saving thousands of dollars over your college career.
- Borrow Only As Much As You Need: Many students need to take out federal and private student loans to pay for college expenses. When you glance at the financial aid offers, you will see the amount of credit that the federal government or a private lender is willing to give you to pay for college. Many students succumb to the temptation of leading an extravagant lifestyle. So, they accept the entire amount of credit on offer, not realizing that they will need to pay this back once they graduate. To eliminate this, consider only borrowing as much as you need to live comfortably in college. Explore avenues that enable you to work on a part-time basis during the school year. In addition, look for ways to save money over the summer. Doing this would lower the amount of debt you need to repay once you graduate. This is infinitely more preferable than living lavishly in college, only to find that you cannot afford your repayments once you graduate.
- Look for the Best Deals in Private Loans: If you need to take private student loans, it is worth remembering that no two private loans are identical. Therefore, consider shopping around for different private student loans. In addition, compare the offers made by various private lenders. Some lenders will attach fees to their loans. Other lenders might offer discounts after you complete your first year of scheduled repayments. Use loan comparison sites for comparing private loan options. Most importantly, pick a lender (and a loan) that meets your requirements not just when you’re in school, but also once you’ve graduated.
- Demonstrate Active Involvement Throughout the Lending Process: Throughout the lending process, your student loan lender will offer a number of resources to keep you informed. Therefore, you must be aware of the terms of the loan, as well as the interest rates applicable. You must also be aware of the estimated repayment amount after you graduate. During the lending process, you will need to sign a number of forms. Understand the documents that you’re signing. In addition, be aware of your rights as a borrower, in addition to your responsibilities. Being aware of these things will help you stay on top of your loan until you have repaid it.
- Try to Make Interest-Only Repayments While in School: Some federal student loans typically accrue interest even while you’re in school. This applies to most private student loans as well. During your years in college, this interest will keep accruing to your loan balance. As a result, you will have a much higher balance once you graduate. In this scenario, consider paying some (or all) of the interest that accrues on your student loan each month, while you’re attending college to lighten the debt load when you get out.