The cost of a college degree can be a daunting amount. Fortunately student loans are available to help you but they do come with many cautionary tales of disaster. Simply taking all of the money you can get without considering how it affects your future is a recipe for disaster. So keep the following in mind as you consider student loans.
Don’t overlook private financing for your college years. Even though there are plenty of student loans publically available, you are faced with more people trying to secure them. Private loans are available, though perhaps not in the volume of federal ones. See if you can get loans for the books you need in college.
If you are moving or your number has changed, make sure that you give all of your information to the lender. Interest begins to accrue on your loan for every day that your payment is late. This is something that may happen if you are not receiving calls or statements each month.
Be careful when consolidating loans together. The total interest rate might not warrant the simplicity of one payment. Also, never consolidate public student loans into a private loan. You will lose very generous repayment and emergency options afforded to you by law and be at the mercy of the private contract.
Know how much time you have in your grace period from the time you leave school until you must begin paying back your loans. For Stafford loans, it should give you about six months. For a Perkins loan, this period is 9 months. Other types of student loans can vary. Keep in mind exactly when you’re supposed to start paying, and try not to be late.
When deciding how much money to borrow in the form of student loans, try to determine the minimum amount needed to get by for the semesters at issue. Too many students make the mistake of borrowing the maximum amount possible and living the high life while in school. By avoiding this temptation, you will have to live frugally now, but will be much better off in the years to come when you are not repaying that money.
To keep your student loan debts from piling up, plan on starting to pay them back as soon as you have a job after graduation. You don’t want additional interest expense piling up, and you don’t want the public or private entities coming after you with default paperwork, which could wreck your credit.
Never sign any loan documents without reading them first. This is a big financial step and you do not want to bite off more than you can chew. You need to make sure that you understand the amount of the loan you are going to receive, the repayment options and the rate of interest.
Student loan deferment is an emergency measure only, not a means of simply buying time. During the deferment period, the principal continues to accrue interest, usually at a high rate. When the period ends, you haven’t really bought yourself any reprieve. Instead, you’ve created a larger burden for yourself in terms of the repayment period and total amount owed.
Private student loans are very volatile. Discovering the exact terms and fine print is sometimes challenging. A lot of the time you’re not going to learn about them until you’ve signed the paper. Then, it will be very hard to free yourself from them. Learn all that you can prior to signing. If a lender gives you a good offer, see if another lender will match it or do even do better.
Don’t pass up the opportunity to score a tax interest deduction for your student loans. This deduction is good for up to $2,500 of interest paid on your student loans. You can even claim this deduction if you do not submit a fully itemized tax return form. This is especially useful if your loans carry a higher interest rate.
Know when and how much you will need to begin repaying. Some loans offer grace periods, forbearance options and other financial choices that depend on your circumstances. Make certain you discuss all of the alternatives with your lender. It is best to know this information prior to requesting a loan.
Know the terms of your grace period. Your grace period is the time you have after leaving school until your first payment is due. The grace period can vary, depending on the kind of loan you have. Missing your first payment is not a good way to start off your repayment plan.
If you find that you will not have the available funds to make a particular payment, let your lender know right away. You will find they are likely willing to work together with you so you can stay current. You might be able to lower your payments or take a few months off.
Choose a loan that gives you options on repayment. private student loans are generally less forgiving and less likely to offer options. Federal loans usually have options based on your income. You can usually change the repayment plan if your circumstances change but it helps to know your options before you need to make a choice.
It may seem easy to get lots of money for college, but be smart and only borrow what you will need. It is a good idea not to borrow more than one your of your expected gross annual income. Be sure to take into account the fact that you will probably not earn top dollar in any field immediately after graduation.
The information above is just the beginning of what you should know as a student loan borrower. You should continue to educate yourself about the specific terms and conditions of the loans you are offered. Then you can make the best choices for your situation. Borrowing wisely today can help make your future that much easier.
