Obtaining student loans is one of the biggest and most expensive decisions you will ever make in your lifetime, and it is up there with purchasing a car or a house. It’s important to understand what you’re getting into, agreeing to, and what is expected of you in the years to come. Here are three of the most common mistakes to avoid:
Not Doing Your Research
Before you decide on which student loans you should get, the most important step is research. This will help you understand what choices are available to you and which will best fit your situation and financial needs. Will you need a federal loan or private student loan? Direct subsidized loans or unsubsidized? Will your parents be helping you? The first step to your research should be to visit the federal financial aid website and complete the FAFSA to see if you are eligible for any government supplied financial aid.
You should also take the steps to understanding how loans, interest, and repayment work. Each loan will have different requirements. For example, a federal direct subsidized loan will cover your interest while you are in school. However, an unsubsidized loan will have interest immediately begin to accrue. Before you sign on the dotted line, it’s vital that you understand the ins and outs of what you’re signing for.
Losing Track of Information
A very common mistake that students make is not keeping track of all their loan information. This is extremely important especially if you have more than one loan out at any time, and many Bachelor’s degree students will have as many as 12 loans before they graduate. If a loan is forgotten, it could cause you to be late or even default on your payments. Money is still due even if the lender does not send you the statement.
If you move or change your phone number, it is also essential that you pass on your new information to your lender. Using old contact addresses could cause a delay and then you are responsible for late payments.
Not Understanding Repayment Options
When it comes time to repay your loan, it is important to understand your options. You have to decide if you’d rather pay off your loans quickly or have low interest rates, for example. Each loan comes with a standard plan, but if that doesn’t fit your financial needs, you can request different choices. Some can actually be designed around your income or have a fixed interest rate.
This also involves considering consolidation. If you have several loans, you may want to think about putting them all under one lender. This could make repayment easier and sometimes even less expensive in the long run.
Whether obtaining your first student loan or starting your repayment plan, it’s important to understand the ins and outs of what’s expected of you. It’s essential that you keep on top of the information as well as paying your statement on time. Making any of these mistakes could be costly for your wallet, your credit score, and your future.
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