Student loans are simply a part of life for most college students. As the cost of education continues to skyrocket faster than increases in income happen, students are forced to turn to loans to pay for their schooling. Student loans can be a positive experience, if you avoid these five common mistakes.
Relying on Private Loans
Before you start pursuing private loans, be sure that you have exhausted your federal loan and grant options. Even if you do not qualify for grants, you may qualify for federally backed loan programs. File the FAFSA, even if you think it is fruitless. Remember, it is free, and you may qualify for something that surprises you.
Private loans are not a horrible option, but you should only choose them if you cannot pay for your education some other way. They often have higher rates and fees that you would not have to pay with government loan options. Also, private loans are less flexible if you find yourself in a situation where you cannot make your payments.
Borrowing Too Much
Sure, the money is available, but that does not mean you need to use it. Many students borrow as much as they possibly can to pay for their education, even when there are other options out there, such as work scholarship programs or good paying jobs. Do everything in your power to avoid debt while you are in school.
Signing Loans They Don’t Understand
If you don’t understand the loan terms, do not sign it. Make sure you understand what you are agreeing to. What is the repayment term? Do you have any grace period after graduation? What happens if you cannot repay? Is the rate variable or fixed? Read all of the terms and conditions thoroughly before you sign the loan. Yes, you need the money, but you need to know exactly what you are promising to do after you get it.
Paying More Than They Should
There are two ways students end up paying more than they should for their student loans. The first is through adjustable rates. Adjustable rates look low when you start the loan, but they change, which almost always means they go up. Opt for fixed rate loans. The rate may be higher at the outset of the loan, but it will not change. The other way students pay more than they should for their loans is through unnecessary fees. Processing and application fees are not necessary, so do not apply for loans that charge them.
Making Payments Late
For many students, student loans are the first major bills they have to repay. The bill needs to be paid on time every single month. Remember, your student loans directly affect your credit rating, and as a student your rating is probably low due to your lack of credit history. Keep in mind, however, that you may have a few months after graduation before you have to start repaying the loan. As you shop for lenders, look for one that offers this type of grace period. It may take you a few months to land your dream job, so this is an important feature of a good student loan.
Remember, even though you really need the money, you are the customer who is shopping for a loan. This puts you in a position of power, so use it to find the best loan options.
By: Terry Mitchell
Posts Tagged ‘Repayment Term’
Direct Education Loans – Direct, Low-Cost Funds For Your Studies
January 24th, 2010
Education is the route to a successful future but it can be pretty expensive. While picturing school life or college life, many fail to consider that it is not just the books, hostel fees and tuition fees for which you need money. Miscellaneous purchases have to be made throughout the year; commutation charges, mess fees, computer bills and even recreational activities have to be included in the budget. They cannot be taken lightly. Many aspiring students who cannot afford the total expense on their own have to rely on loans. Private lending companies however tend to charge high interest rates which cause more burdens on you. A direct education loan seems a more affordable option.
Direct education loans are state funded lending programs available for students. It is provided to you or your parents directly from the government without the involvement of a third party. It can be taken no matter what course of study you are pursuing- graduate or undergraduate; vocational, arts, commerce, science or business. Direct education loans cover most of the expenses that may be incurred in an average student’s life:
• Purchase of books and stationery
• Rent/ hostel fees
• Library fees, tuition fees and mess fees
• Medical treatments
• Travel expenses.
Direct education loans provide an amount in the range of £750 to £20,000 per year or a maximum of £65,000 for the whole course. 6 months after the completion of your course, you have to start repaying the loan. Repayment term will depend on the amount that you are borrowing. So, during this grace period, you can utilize the time to look for a job.
Direct education loans are preferable options mainly due to their affordability. You are borrowing from the government funds and so, the interest rates are cheaper than those on student loans provided by private institutions. What’s more, you do not have to provide collateral.
Direct education loans are easy to find. You can take the help of the student loan counselor in your school or college. He will provide you the brochures and reading materials. You can check out the full terms and conditions through these papers and select a viable program.
By: Henry R Bell
Consolidating Your Student Loans
January 4th, 2010
Debt from student loans can be crushing to recent college graduates and get in the way of achieving other life goals. Fortunately, there is a way to reduce the strain on your finances and even improve your credit score. Many graduates are turning to loan consolidating to help manage their loan repayments. The procedure and requirements differ from federal and private loans.
Consolidating Federal Loans
Stafford loans and Federal Perkins loans are examples of federal loans. These loans are given to you by the government and may or may have accrued interest while you were attending school. Consolidating your federal student loans provides a fixed-rate refinancing program that takes all of your existing federal loans and combines them into one new loan. Your monthly student loan repayment could be cut by as much as 50% as well as reduce your interest rate by .6% if you consolidate during your grace period. One monthly payment will help you simplify your finances.
Payment relief
By creating one consolidated loan you can receive payment relief, a lengthening of your repayment term from the standard 10 years to up to 30 years. This frees up your disposable income to spend on other expenses like car payments, housing, and work-related necessities. There are no penalties for overpayment, so when the funds become available you can make larger payments and minimize your repayment term.
Consolidating Private loans
Like federal loans, consolidating private loans means lumping everything into one new loan. To consolidate your private loans from undergraduate school you will have to apply with a qualified co-signer in order to be approved. If you have a graduate degree you do not have to apply with a co-signer.
Some of the benefits include reduced interest rates, rate reductions, deferment, and no prepayment penalties. Loan holders may lower your interest rates if your credit has improved. Applying with a co-signer who has good credit could help you get a lower APR loan. There is a grace period for medical/dental residents as well as military personnel if their private student loans are consolidated. As with federal student loan consolidation, you can also have your repayment period extended allowing you to pay the lowest monthly payment possible.
By: Joseph Devine