Attending college is the cherished dream of many students. But fulfilling this dream isn’t possible if you can’t arrange for the funds necessary to pay the college expenses. Even after you receive the acceptance letter from your favorite college, you may have to solve the financial riddle before you can finally set foot on the campus as a student there. Opting for a student loan seems to be the easy way out. When it comes to a student loan application, it is important that you adopt the correct approach right from the very beginning.
Here are a few essential tips for taking out a student loan.
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Consider all options with an open mind
A student loan can come in two forms: federal and private. Federal student loans are the ones that are directly sponsored by the government. Private student loans are the ones that are funded by individual lenders, such as credit unions and banks. More often than not, federal student loans follow standardized norms. The interest rate and terms and conditions of the loan are kept same for most borrowers. Even if the borrower has a very good credit score, it doesn’t make any impact on the interest rate of the loan. Note that a federal student aid may not be enough to cover your entire college expenses.
On the other hand, a private student loan is not standardized. The rate of interest can vary from one borrower to another. Also, the loan limits are higher in case of private loans. This means you can get a loan to cover the whole cost of attendance for your college after deducting the federal student aid or any other financial help like scholarships or grants received by you.
Borrow no more than what you need
The student loan is not free money. Remember that you will have to pay interest on every dollar you borrow. Try to figure out approximately how much money you may require to sail through college in a comfortable manner. To get an idea of the expenses, take a look at the college fees and other expenses like books, etc. Then consider the cost of your living as well as your transportation to the college. Once you have a rough idea of the expenses, determine how much your family will be able to contribute to your education.
Next, take into account any scholarship, grant, award, or financial aid that you have received for your college education purpose. This will help you to know how much more you will need to borrow. Even if you are offered more than what you require, there is no obligation for you to accept the whole loan amount.
Understand all the terms and conditions
There are several things that you need to be clear about before you accept the loan offer. It may not be easy for you to understand all the terms and conditions of the loan. But do not make the mistake of signing on the dotted line till you are sure of what you are getting into. If needed, you can ask someone who is knowledgeable enough to clarify you the points regarding which you have confusion. Have a clear idea of how much the loan will cost you in total.
Try to figure out what will be the value of the loan instalments that you will have to pay every month. Also, know if the loan is offered at a fixed rate or a variable rate of interest. Do not hesitate to ask if there is any way through which you can lower the rate of interest. Additionally, know if there are any fees involved in processing the loan.
Plan making interest payments as early as possible
You won’t have to start making payments for your loan until you have earned your degree and graduated out of college. But if you can start making interest payments when you are still in college, it will help to bring down the interest accrued on your loan. It’s not necessary to be able to repay a lot. You can start paying whatever amount you can spare for the purpose.
If you can take up a part-time job, you will be able to contribute a bit more towards the loan payment. But consider the option of becoming a working student only if you can handle it well along with your college studies. By making small payments every month, you will be able to bring down the total cost of your loan even before you take up your first job after completing college.
