Student loans have become so ubiquitous, that it is hard to find any college or graduate school student who hasn’t incurred at least one. However, those who lack sufficient understanding of the risks involved in such borrowing may end up in real trouble. Keep reading in order to become an educated prospective borrower.
Always know the pertinent details of your loans. This will help you with your balance and repayment status. These three details all factor heavily into your repayment and loan forgiveness options. This information is necessary to plan your budget accordingly.
If you have extra money at the end of the month, don’t automatically pour it into paying down your student loans. Check interest rates first, because sometimes your money can work better for you in an investment than paying down a student loan. For example, if you can invest in a safe CD that returns two percent of your money, that is smarter in the long run than paying down a student loan with only one point of interest. Only do this if you are current on your minimum payments though and have an emergency reserve fund.
If you’ve taken out more than one student loan, familiarize yourself with the unique terms of each one. Different loans will come with different grace periods, interest rates, and penalties. Ideally, you should first pay off the loans with high interest rates. Private lenders generally charge higher interest rates than the government.
When you begin to pay off student loans, you should pay them off based on their interest rates. Pay off the one with the highest interest rate first. This extra cash can boost the time it takes to repay your loans. Student loans are not penalized for early payoff.
Be sure you understand the terms of loan forgiveness. Some programs will forgive part or all of any federal student loans you may have taken out under certain circumstances. For example, if you are still in debt after ten years has passed and are working in a public service, nonprofit or government position, you may be eligible for certain loan forgiveness programs.
To reduce the amount of your student loans, work as many hours as you can during your last year of high school and the summer before college. The more money you have to give the college in cash, the less you have to finance. This means less loan expense later on.
To stretch your student loan as far as possible, talk to your university about working as a resident advisor in a dormitory after you have finished your first year of school. In return, you get complimentary room and board, meaning that you have fewer dollars to borrow while completing college.
There can be little debate about the fact that student loans are necessary for countless folks interested in pursuing advanced education. At the same time, far too many people fail to fully grasp how the process works before they incur very significant amounts of debt. By using the above guidance, anyone can become better aware of their available options.