College students go off to college with a head full of dreams for their future. They are often offered many types of student loans that are all too easy to get. So they sign up without thinking if the future consequences. But keep the advice from this article in mind to avoid making a costly college disaster. Start your student loan search by looking at the safest options first. These are generally federal loans. They are immune to your credit rating, and their interest rates don’t fluctuate. These loans also carry some borrower protection. Th
- If you are having a hard time paying back your student loans, call your lender and let them know this. There are normally several circumstances that will allow you to qualify for an extension and/or a payment plan. You will have to furnish proof of this financial hardship, so be prepared.
- When it comes to student loans, make sure you only borrow what you need. Consider the amount you need by taking a look at your total expenses. Factor in items like the cost of living, the cost of college, your financial aid awards, your family’s contributions, etc. You’re not required to accept a loan’s entire amount.
- Know your grace periods so you don’t miss your first student loan payments after graduating college. Stafford loans typically give you six months before starting payments, but Perkins loans might go nine. Private loans are going to have repayment grace periods of their own choosing, so read the fine print for each particular loan.
- Try paying off student loans with a two-step process. First you need to be sure that you know what the minimum payments for the loans will be each month. After that, pay extra money to the next highest interest rate loan. This will minimize the amount of money you spend over time.
- Never ignore your student loans because that will not make them go away. If you are having a hard time paying the money back, call and speak to your lender about it. If your loan becomes past due for too long, the lender can have your wages garnished and/or have your tax refunds seized.
- 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.
- Pay the largest of your debts first. A lower principal means you will pay less interest on it. It is a good idea to pay down the biggest loans first. When you pay off a big loan, apply the payment to the next biggest one. If you make at least the minimum payment on all loans and large payments on the biggest loan, your student loan balances will disappear.
How to approve:
- If you want to give yourself a head start when it comes to repaying your student loans, you should get a part-time job while you are in school. If you put this money into an interest-bearing savings account, you will have a good amount to give your lender once you complete school.
- Take advantage of student loan repayment calculators to test different payment amounts and plans. Plug in this data to your monthly budget and see which seems most doable. Which option gives you room to save for emergencies? Are there any options that leave no room for error? When there is a threat of defaulting on your loans, it’s always best to err on the side of caution.
- PLUS loans are a type of loan option for parents and graduate students. The PLUS loans have an interest rate below 8.5%. Although this rate is higher than that of the Perkins and Stafford loans, it is lower than the rates charged for private loans. Therefore, this kind of loan can be useful for students who are older.
Avoiding a student loan disaster can be achieved by borrowing wisely. That may mean that you might not be able to afford your dream college or that you may have to adjust your expectations of college life. But those decisions will pay off in the future when you get your degree and don’t have to spend half of your life paying back student loans.