Ask Questions & Get AnswersSpeaking of which, before borrowing, know what your loan is going to cost you when it comes time to repay. Ask important questions, such as:
• What types of loans are right for me, federal or private?
• What is the interest rate?
• How do the rates rise (and how often)?
• How will a rate rise and/or fall affect me?
• When do the payments begin?
• What happens if I miss a payment?
• How will it impact my debt if I pay more than my minimum payment?
• At what point does interest start to accrue?
• How much does taking out this loan mean I will owe, taking interest rates into account?
• How long will it take me to pay this loan back as a result of these factors?
Incorporate Your Loan Payment Into Your BudgetIt’s always easier to lessen your debt before you take out any loans than after. From the start, think of and develop a plan that details how you’re going to pay back your loans – take initiative to create a plan. Sticking to your plan, however, is the key to tackling your debt. If you’re considering pursuing higher levels of education, remember to factor in the cost of attending graduate school as well. To help you create a realistic budget and choose a realistic repayment plan with your student lender, you can estimate your student loan repayment.
Borrowing & Debt Go Hand-in-HandKnow that you will have debt because student loan debt follows borrowing. That’s why you should always try to borrow as little as possible, not as much as available. Experts tend to recommend that students choose federal loans over private loans when available. Try your best not to borrow more than the federal limit. It may seem like a free payday now, but you will regret taking advantage of that extra money you did not need later when it comes time to pay it back – and then some. That being said, when choosing your repayment plan, choose the highest minimum payment you can afford. This will save you the most money on interest in the long run, which is best. Along the same line of thought, if you have more than one student loan, take on paying the one with the highest interest rate first to save money.
Look at Borrowing as a Last ResortYou should try your best to keep your borrowing to a minimum. When possible, utilize other means of paying for school such as taking on a part-time job, applying for scholarships and grants, start out at a local community college and transfer – whatever you need to do to keep your costs low and save, avoiding taking on a student debt burden.
Debt Doesn’t DisappearRemember that you will have to pay back your student loan no matter what! This includes situations such as: you weren’t able to complete your degree; you’re not able to find a job post-graduation or were unhappy with the education you received.
Payback Should Be ConstantBefore you take on any student loan, make sure to work an estimated loan payment into your current budget to ensure you’re able to afford the cost. This ensures you won’t spend more than your monthly payment right from the start and that you will be on track with payments upon graduation. Note: some student lenders even give interest rate reductions for setting up auto payments, so it may be in your best interest (no pun intended) to do so immediately! It’s a great option if you can afford it (if you’ve budgeted your monthly payment in, you should be able to) and it also guarantees you will never miss a payment. Whenever you have extra money, make payments towards your loan to reduce your debt. Since you accumulate interest on many loans (even while you’re in school) it’s smart to make payments whenever you are able. There are no penalties on federal or private student loans for making extra payments, so pay away! Live below your means. In other words, live like a student while you are one, so you don’t have to once you graduate. It’s much easier to live like a student with friends when everyone’s doing it versus upon graduation, when nobody else seems to be doing it. Also, it’s easier as a student to do things like find cheaper housing, live with several roommates and cut down on other costs. You can definitely get away with things as a student more easily than you can in the “real” world so take advantage of spending less while you’re able. This means looking into the costs of your living expenses and prioritizing what’s really necessary and what isn’t – you need to determine what you can actually afford. Even better, think about setting aside a little extra each week or month (whatever works best for you) in addition to your monthly payments. This will help you pay off your loan faster because you’ll be paying more than the minimum payment, which is always a good thing.
You Will Graduate with DebtOkay, so you’re going to have debt when you graduate. Don’t freak out – this doesn’t necessarily mean you’re going to be a senior citizen with debt, especially if you follow a strict repayment plan and stick to it. If you really want to avoid this here’s the cardinal rule: don’t let your total debt amount exceed the lower range of your estimated first year’s salary! In reality, ideally, you should aim to have your student debt amount upon your college graduation significantly lower than your annual starting salary at your new job. If you don’t have a new job yet, research and know the realistic earnings potential of a graduate within your field of study. You can research salary estimates on sites like Salary.com, Payscale.com or Glassdoor.com. Need more help? You can find more expert financial aid advice right here on Fastweb!
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