Getting a college degree is an expensive affair. Aside from school fees, you will need to finance other things like transportation, campus housing, food, personal supplies among others.
Financing all these things might not be easy especially for students with financial needs. While you can always opt for a part-time job to make extra money, it could mean less study time. At this point, student loans might be the only option.
The two main types of undergraduate degree loans. These are, the private and federal student loans. You can get these loans by submitting various application forms to the relevant parties. That said here are key things to look at before applying for a college loan.
- Consider federal loans before private ones
Federal loans are funded by the government while private ones are offered by lenders such as credit unions, schools, state agencies, or banks.
Federal loans are more desirable because you don’t require a good credit history to qualify and have an income-driven repayment plan as well. They also offer fixed interest rates which are much lower compared to those of a private loan.
Private loans demand payments even when you’re still in school and this might be quite challenging for students with zero source of income.
- Consider scholarships
Before you opt for a student loan, consider other options like scholarships, work-study, or grants. There are several local, national or school-based scholarships you can apply for online and the best part is, they are strictly free.
No repayment is required when applying for a grant or scholarship. Scholarships minimize the need for a student loan, therefore there is a need to apply as many as you can. You will also have an easier time after college with fewer debts.
- Borrow only what you need
Start by having a well-planned budget and include all the things you would want to finance. What are the rent rates in your area? How much are you planning to spend on food and other personal items?
Also, get an estimate of your future earnings to avoid borrowing much than your salary can handle when it comes to repayment. For instance, if you anticipate your salary to be approximately $50000, you can borrow up to $26,000 at existing rates.
Keep in mind that your school plays a huge part in accepting or rejecting financial aid requests. See this link to read more about student loans https://thebestschools.org/resources/college-finances/about-student-loans/.
- Fees and interests on loans
Just like any other type of loan, undergraduates are required to pay a certain percentage of the total amount of the loan as a fee for the loan.
This also includes the accrued interests on the loan which are added to the debt owed when repayment begins. The interest rates of a federal loan are fixed, currently about 3.73%. However, this may change annually depending on various underlying factors.
Private lenders, on the other hand, will use the credit history of your guarantor to determine your rate.
- Time of payment
Find out when you will be needed to start paying back your loan. Some lenders will wait until you have graduated and secured your first job to pay the loan while others will ask you to begin the repayment process a few months after securing the funds. The latter can be a bit tricky, especially for students whose families are struggling financially.
- Plan your classes
Planning your classes will help you budget your money properly. It also gives you a clear picture of the amount needed to complete your studies and how much you need to borrow. The goal here is to borrow only what you need.
Of course, things may change in between, and you may need to revisit your plans in the future. However, the best plan is to limit your borrowing to the amount needed for books, classes need, and basic living expenses.
- Know your servicer
As mentioned, federal loans are made by the government. Once you have secured such a loan, the federal government turns over your debt to a student loan servicer who monitors your loan payment.
If you decide to take a private loan from the bank, the bank becomes your servicer or it may appoint another company to manage your debt.
Get to know your servicer while you are still in school. Most lenders will provide you with a six-month grace period before the first bill arrives. Click here for more reading.
Study shows that about 2 out of 3 students are unable to clear their fees before they leave college due to lack of funding. Getting a student loan can help you finance your college expenses so you can study in peace. However, it might not be as easy as it sounds. Just like any other type of loan, there are things you must consider to make sure you’re eligible for one. Know how much a student loan can cover and only borrow what you need. Also, get to know the payment period as well as the fees and interest on the loan.