Student loans can be a real life-saver for students who need financial assistance to support their higher education dreams. However, in their eagerness to get the funds and start classes, many students end up making mistakes, which cost them a lot in the end. To avoid making these common mistakes, ask yourself these questions before you select a student loan.
Do I Really Need All Of It?
When you fill out your FAFSA, you are required to provide details of your family’s financial situation. The various colleges you apply to will put together a financial package for you based on the information that you submit. It could happen that during the process, your family’s financial situation changes and you do not need to borrow the full amount offered to you to cover your cost of education.
In this case, you have a choice. You could take it all and use it to splurge on non-essentials or you could decline the extra amount and only take what you need.
As a general rule, it is always best to borrow only what you need for essentials. If you take more now to have fun, you will end up having to pay hundreds of dollars more every month in repayments after you graduate.
If you do take more than is necessary, you must do this after giving it a lot of thought and asking yourself if it is worth it. It must be a conscious decision.
What Can I Cut Back On So I Can Lessen My College Costs?
As a college student living on your own, you are going to have to pay for every little thing, from your food, accommodation and stationery, to travel, toiletries, and dorm room furnishing. The cost of all of these items can range widely, from really cheap to hugely expensive. It’s the choices you make that will determine how much you need to get through the year and how much you will need to borrow.
You can lessen your college costs substantially by cutting back on several little things. Cook at least some meals in your room instead of dining out every day. Choose shared accommodation instead of a single suite. Rent or buy used textbooks. The money you save through each of these measures will add up to a considerable amount, which means you will need to borrow that much less.
Is There Any Other Way To Get Some Money So That I Can Reduce My Total Loan Amount?
Scholarships and grants are two of the best ways to get free money for your college education.
There are thousands of scholarships available. These are awarded to students based on a wide range of criteria, regardless of income level. What’s more, you can apply for multiple scholarships under different criteria.
For example, if you are an outstanding student, you may be eligible to apply for a scholarship based on academic merit. If you are an accomplished athlete, musician, or artist, you can also apply for scholarships awarded for these categories. Then you could also apply for awards offered by local business people to members of their community or an award for speaking a foreign language. You can even find scholarships for tall individuals above a certain height or those belonging to a certain religion or culture.
This is a fantastic opportunity and one you must take advantage of. Whatever time you spend researching scholarships is well worth it as you are likely to unearth awards for some of the most unusual criteria that you may be eligible for.
Grants also free money but they are offered based on financial need and are definitely worth looking into.
Any scholarship or grant money that you win can significantly reduce the amount you need to borrow.
What Type Of Loan Should I Apply For?
There are three main types of loans that college students can apply for—federal, private, and institutional.
Federal or public loans are offered by the government. These have the best terms and should always be your first choice. They carry lower interest rates, which are fixed for the life of the loan. They are also more flexible in their repayment plans and you could get your loan forgiven under certain circumstances. A subsidized federal loan is by far the best as the interest does not accrue until after you graduate.
Private loans are offered by private financial institutions such as banks, credit unions, corporate and local businesses. These loans are generally much more expensive as compared to federal loans. They attract higher rates of interest and more often than not, they have inflexible repayment plans. You cannot change your plans, or consolidate your loan and there is no option for forgiveness.
Institutional loans are the loans granted by your college. The interest rates, repayment plans and other terms vary widely from one college to another. You will have to see what your college offers before you choose.
Have I Considered All Education Options?
The cost of tuition varies drastically between colleges. At the extreme ends you have the super-expensive private colleges and the very affordable community colleges. Most tuition fees fall somewhere on the spectrum between these two extremes.
Is your first-choice college the most expensive on your shortlist? Is it a private or out-of-state college? How much will you have to borrow to attend that college and is it really worth that debt?
Is there another public or in-state college that offers the programs you are interested in but at a fraction of the cost? Or, is there a way you can attend 2 years of community college and then transfer to a public or private university for the next two years? Both of these options offer affordable solutions and could mean taking on a much lower student loan debt. The peace of mind you will get from graduating with less debt may be well worth it.
Asking yourself these 5 questions before selecting a student loan will ensure that you make conscious choices about the amount of money that you borrow to fund your college education.
Use College Raptor’s new student loan finder to discover personalized loan options. Compare lenders and interest rates to find the ideal student loan—for FREE!