While some mistakes can simply be brushed off as a part of the learning process, mistakes that you make when borrowing money can turn out to be very expensive. Far better to spend some time learning about the do’s and don’ts for the first-time student loan borrower BEFORE taking any loan instead than paying for those mistakes afterwards.
When it comes to student loans, knowledge is power. You’ve read plenty about what you need to do to get a student loan. It’s just as important to know what mistakes to avoid. These are some of the most common first-time student borrower mistakes that you should look out for and avoid.
Not Exhausting Your Free Money Options First
Loans may help you get the higher education you need, but they come with an expensive price tag—you have to repay every loan dollar with interest. On the other hand, scholarships and grants are free money, which means you do not have to return it. The more free money you get, the less you will need to borrow and the faster you will be on your way to financial freedom after graduation.
What you should do: Before you borrow any money, spend as much time as possible doing an exhaustive search on scholarships and grants that are available and apply to all opportunities that you qualify for. It’s worth it.
Not Filing the FAFSA
Filling the FAFSA or the Free Application for Federal Student Aid is mandatory in order to get financial aid towards college expenses. Unfortunately, many students either do not know about the FAFSA, or they fail to file it before the deadline. This is one of those expensive mistakes you do not want to make. If you do not submit the completed FAFSA you will not receive a dime in financial aid.
Remember, the FAFSA works on a first-come-first-serve basis, so the earlier you submit it the higher your chances of getting the maximum aid you are entitled to. Make sure you do not submit any inaccurate information as this will impact the amount of financial aid you receive.
What you should do: Read about the FAFSA and understand how it works. Get all of your financial information together so you are ready to file it as early as possible.
Taking Everything You Are Offered
When you file the FAFSA, your prospective college will put together a financial aid package based on the information you provide. The details of your package will be included in your award letter.
You can take everything offered in the award letter but remember: you will have to pay interest on all the money you borrow and that interest will keep accruing throughout the 4 years that you are in college. This can add up considerably over the life of the loan.
What you should do: Never borrow more than you need. If your financial aid package is higher than your requirement, write to the college’s finance office and let them know. They will reduce the package accordingly.
Taking Private Student Loans First
Private student loans come with higher interest rates and more inflexible terms when compared to federal student loans. There are also no forgiveness options with private loans. Taking private loans without applying for scholarships or submitting the FAFSA is one of the biggest mistakes you can make as a student loan borrower.
What you should do: Think of private student loans as your last resort. Only apply for a private loan to cover the deficit after you have exhausted all other available options.
If you find yourself needing a private student loan, it’s important to find the loan option that fits you best. With College Raptor’s free Student Loan Finder, you can compare lenders and rates side by side.