Common student loan mistakes
Student loans are simply a part of life for most college students. As the cost of education continues to skyrocket faster than income increase, students are forced to turn to loans to pay for their education. Student loans can be a positive experience, if you avoid these some common mistakes.
Relying on Private Loans
Before you start pursuing private loans, be sure that you have exhausted your federal loan and grant options. Even if you do not qualify for grants, you may qualify for federally backed loan programs. File the FAFSA, even if you think it is fruitless. Remember, it is free, and you may qualify for something that surprises you.
Private loans are not a horrible option, but you should only choose them if you cannot pay for your education some other way. They often have higher rates and fees that you would not have to pay with government loan options. Also, private loans are less flexible if you find yourself in a situation where you cannot make your payments.
Borrowing Too Much
Sure, the money is available, but that does not mean you need to use it. Many students borrow as much as they possibly can to pay for their education, even when there are other options out there, such as work scholarship programs or good paying jobs. Do everything in your power to avoid debt while you are in school.
Signing Loans They Don’t Understand
If you don’t understand the loan terms, do not sign it. Make sure you understand what you are agreeing to. What is the repayment term? Do you have any grace period after graduation? What happens if you cannot repay? Is the rate variable or fixed? Read all of the terms and conditions thoroughly before you sign the loan. Yes, you need the money, but you need to know exactly what you are promising to do after you get it.
Paying More Than They Should
There are two ways students end up paying more than they should for their student loans. The first is through adjustable rates. Adjustable rates look low when you start the loan, but they change, which almost always means they go up. Opt for fixed rate loans. The rate may be higher at the outset of the loan, but it will not change. The other way students pay more than they should for their loans is through unnecessary fees. Processing and application fees are not necessary, so do not apply for loans that charge them.
For many students, student loans are the first major bills they have to repay. The bill needs to be paid on time every single month. Remember, your student loans directly affect your credit rating, and as a student your rating is probably low due to your lack of credit history. Keep in mind, however, that you may have a few months after graduation before you have to start repaying the loan. As you shop for lenders, look for one that offers this type of grace period. It may take you a few months to land your dream job, so this is an important feature of a good student loan.
Remember, even though you really need the money, you are the customer who is shopping for a loan, shop diligently.