What I Wish I’d Known About My College Loans

Flickr user Tax Credit

Flickr user Tax Credit

It’s not difficult to get a student loan. Guidance counselors and admissions representatives practically serve them up on silver platters. All I had to do was sign on the dotted line, before some imaginary funds were shuffled around and my class schedule popped out of my printer.

Now, when I get my bill every month, I find myself wishing that I had been more informed. What would I have done differently, and how might my life be better, if I had known more? Here are a few of the lessons I wish I’d been taught before taking out all the student loans.

There are options.

I grew up in your typical middle-class suburb, and at my high school, I earned good grades and stayed out of trouble. There was never any question about what I’d be doing three months after I was handed my high school diploma.

Nobody ever really asked me if I wanted to go to college—not that I was protesting; I wanted to go. But if they had, I wouldn’t have had enough information to even consider that question. For myself, and my friends, was just a given that I’d march right off the high school graduation stage and into a 4-year degree program.

But of course, there are other options. Don’t limit yourself to college; look into technology programs, community college, learning a trade and more.

Paying off loans is serious business.

There are plenty of options for paying off your loans that, when set up properly, can help you save in the end, but it wasn’t something I thought about until my deferment period was over. I remember a friend of mine creating spread sheets his senior year of college that analyzed his student loan debt to earning potential ratio—that’s still a mind-twister for me—and I remember thinking, “Is that really necessary?”

While that exact calculation may not be, figuring out what makes the most sense for paying off your loans is. Check out step three in this 5 Step Plan Financial Plans for Graduates to see what options you have after you’ve tossed your cap in the air.

Applying for scholarships is worth it.

In high school, I didn’t put much effort into researching and applying for scholarships. I applied for a few of the easy ones that my guidance counselor gave me, but didn’t spring for anything big that required an essay or other submission. As I continued through college, I never thought about applying for scholarships—which you can do each year—to get more money.

Now I know, there are scholarships available for just about everything you can think of. Places like Fastweb are perfect for searching and finding the best ones for your major, ethnicity, GPA, and more.

Work-study programs, graduate assistantships, and similar opportunities can help cover costs without going overboard on loans, as well. My now husband got an RA (resident advisor) position his sophomore and junior year, saving him $20K total.

That leftover loan money isn’t “free money.”

Each semester, I’d receive an offer letter inviting me to borrow up to a certain amount. I realized that this maximum amount exceeded my tuition, but I never sat down and did the math. Instead, I just always borrowed the maximum amount offered, assuming I’d use the extra to pay other “college” expenses like rent.

The problem? When the balance appeared in my bank account overnight, it felt like “free money.” Of course, “treating myself” to the deluxe weekly planner, with inspirational quotes and color-coded stickers, didn’t seem like a big deal at the time. That money adds up, and it is far from free. In fact it’s much more expensive to pay off, thanks to interest.

Borrow what you need and use work-study or another part-time job to pay the rest, if possible. This will significantly cut down on what you owe when you graduate—an extra $2,000 a semester adds up quickly.

That repayment options have pros and cons.

When I finally saw the dreaded “first payment” email in my inbox, I didn’t really sweat it. Why? My eye was drawn to the colorful text promoting an alternative repayment plan. A quick skim of the details told me everything I needed to know: that I qualified for a pretty low monthly payment.

It’s easy to choose that alternative repayment plan without fully understanding what it means—most notably, without understanding a funny little thing called interest. If I’d had even the most basic understanding of the concept when I was a student, perhaps I would have made some much different choices.

Call and speak with a loan officer or financial expert that you trust before getting into any alternative payment plan. In many cases, paying the maximum amount each month is more cost-effective than paying less, for a longer period of time. If you can buckle down, save, and pay that, it might be worth it.

Don’t get me wrong—loans are helpful, and for many college students, it’s all they have to get through college. Without them, I certainly wouldn’t have been able to graduate from a 4-year program either. However, they’re not the only option—going for scholarships (which you don’t have to pay back) and work-study programs helps you pay for college without racking up interest and more debt.

Hopefully learning from me will help you make smarter student loan decisions so you can walk out of college with a manageable amount of money to pay back and degree you’re proud of.

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