Sometimes students will need to take out loans to access higher education. Although the supplemental funds will ease the financial burden, it is still wise to be smart and vigilant regarding the loan. Here are some tips to ensure that you are as prepared as possible when borrowing money for education:
1. Only Borrow What You Need
Taking out a large loan might be tempting, but remember, you will have to pay back everything you borrowed (with interest). So, calculate exactly how much you’ll need for tuition, books, room and board, and other education expenses, and only borrow that amount. Also, remember that you may be approved for a larger sum than you actually need. In this case, it’s still wise not to take out more than necessary. You’ll thank yourself later.
2. Compare Loan Offers
This is especially true when looking to take out a private student loan. Different institutions will offer different terms, and as with any loan, it’s essential to take the offer(s) that are most advantageous to you. Factors such as the interest rate, repayment schedule, and extra fees can impact how much you’ll end up owing back. Do yourself a favor and dive into the research before picking the right loan for your needs. There are several online tools to compare student loan offers, such as this one from Credible.
3. Understand Your Grace Period
The majority of student loans come with a “grace period”, meaning the amount of time you have before you need to start repaying the loan. Typically, you don’t need to pay anything back while you are in school and the first six months after graduation (of course, this varies depending on your loan). However, if you can afford to make payments while in school (even if they are small or interest-only payments), you could significantly lower the total amount you’ll have to pay back.
4. Keep Track of Your Repayment Schedule
This may seem obvious, but make sure you are paying back your student loans on schedule. Otherwise, you will be at risk of defaulting on your loans, which can lead to severe consequences and impact your ability to borrow in the future. Defaulting on your loans can also lead to “acceleration”, which means the entire balance and interest owed will become due immediately. Failure to make payments will also be reported to credit bureaus, impacting your credit score, which can take some time to rebuild.
5. Consider Refinancing Your Loans at Lower Rates
Once you are out of school and earning an income, you may want to explore refinancing your loans. Though not everyone is eligible, if you are qualified to refinance your loans, you should take advantage of it. Through refinancing, you may sometimes receive a lower interest rate or adjust the terms to be more favorable on your loans. There are online tools where you can compare your refinancing options.
In conclusion, taking out a student loan is like taking out any other type of loan. Be smart and put effort into researching your options, and keep track of your repayment schedule, it can greatly boost access to higher education.