The act of paying for college really put the squeeze on a family’s finances. Things become even more difficult for the college student who may be paying for their own education independently.
For most students, taking out student loans is the only way they can afford to cover the cost of tuition. The big question then is how much should you borrow by way of loans? The answer may vary from one student to another.
But sometimes one loan isn’t enough. Here are some questions to ask yourself before you make the difficult and daunting decision to take out a second or even third student loan.
Do I really need to take out another loan?
Sometimes, what you really need to do is just tighten your financial belt a little to make your money stretch. Think about where you could save some money. Ask yourself some tough questions.
For example: Do you really need a car while you are in college or can you get around on a bike or bus? Think of how much you would save just by way of insurance and fuel. Parking fees may seem like small change, but over the span of 4 years, it can add up.
What type of loan should I get?
As far as repayment options go, federal loans are your best bet. If you no option but to take a second or third loan, it is best to max your federal loans first.
You may choose to investigate institutional or private lender options, but be aware that these options may end up costing much more by way of interest. This is something you must give some serious thought to.
Is there any way I can earn some money instead of taking a second or third loan?
Would you be willing to pick up a small part-time job or try your hand at work-study? Applying for work-study as part of your financial package is a great way to earn some money while you are still in college. What you earn may seem like a drop in the ocean compared to the amount you have borrowed, but it will add up over the years, and it will help you reduce your overall debt.
While it can be tough to juggle academics and work, you’ll be glad you did when it’s time to make those loan repayments.
Are there any scholarships that I can apply to?
Overlooking scholarships is a mistake many students make when looking for funds for their college education. Any award money you win through scholarships is free money. Unlike loans, you do not have to return any money you win through scholarships.
There are no limits to the number of scholarships you can apply to or the amount of award money that you can win. So why not make the most of it! Sure, you will have to spend some time looking for opportunities that you qualify for and then you have to put in some work towards the application. But when you think of the benefits, you have to agree it is totally worth it.
The best way to do an thorough search for scholarships is by changing the search parameters. You’ll be surprised at the awards that are available out there. In addition to scholarships for academic and athletic accomplishments, there are also scholarships for students belonging to certain ethnic, cultural or religious groups, students who speak multiple languages, students who are accomplished in any art form, and students who are pursuing certain programs.
If you are lucky, you may not need to take that second or third loan at all.
When do I start repayment?
You get a grace period with federal loans. You start your monthly payments only about 6 months after you graduate. That gives you sufficient time to find a job so you can start earning money to put towards your loan repayment.
You may not get a grace period with private student loans however. If you are planning on taking a private loan, you must contact your lending institution as soon as possible to discuss repayment plans, options, and what to do if you cannot repay right away. If the lender’s terms are too rigid, you may want to reconsider taking the loan and exploring other ways to get the money you need.
What is the average salary in the career I have chosen?
This is an important question to ask yourself before taking out any additional loan. Graduates in certain fields such as business, marketing, and engineering among others historically earn much higher salaries. Check out what professionals in your chosen field are earning so you have a better idea of your earning potential. This will help you make an informed decision about whether or not you will be able to afford the monthly payments on your second or third loan.
How long will I be in debt if I take those additional loans?
Some students may be fine with being in debt and slowly paying off their loans over the next 30 years or so but maybe you may not be comfortable with the idea. Give some thought to how you feel about being in debt over several years after you graduate. Before you commit to anything, learn about all of your available options. Make a plan and stick with it.