Student Loan Tips
After you’ve received any scholarships (you applied, right?) and filled out your FAFSA, you may still find that you come up short. First, don’t panic - as long as you don’t incur more educational debt than you can handle, you will be fine. In other words, don’t take out student loans for anything besides tuition, books, and reasonable living expenses - cafeteria meal ticket, not dining out every night, buying a university bus pass and not a new car. You’re smart enough to do that, after all, you got into college. Use them as money for college, and nothing else.
Student loans are available from several sources and come in several different varieties. The first thing to check is whether or not your intended career field and economic status would make you eligible for a federal Perkins loan. Generally, you find these through your financial aid advisor. Perkins loans allow partial to full dismissal through service in your career field, generally teaching, nursing/medical, law enforcement, and other jobs which the government deems necessary. If you are eligible, and you are going to work in the field your degree is in, these are definitely the best loans available.
However, not everyone is eligible. In that case, you may check with either your financial aid office or a bank or credit union for other types of loans. If you meet need requirements, the subsidized Stafford loan is generally what you will take out. If you don’t meet the financial need requirements, you can still get an unsubsidized Stafford. The difference is whether the US government will pay any of the interest while you’re enrolled, and while the loan is deferred. These are fixed rate loans, currently at 6.8%, and you must be enrolled at least half-time to be eligible. If you go through a lender, your loan may be sold to a different company after you graduate, while if you go directly through your educational institution, you’ll pay the government directly. You generally have a 6 month grace period after graduation before repayment begins. However, if you want to get a good head start, make payments (even tiny ones) whenever you can before the official repayment period begins. If you qualified for a subsidized Stafford, even a $3-5 payment goes directly onto the principal when you pay before it’s required.
PLUS loans are generally your next to last choice for a reason - these do require a credit check, repayment begins 60 days after disbursement rather than waiting until after you graduate, and they don’t have a fixed interest rate. However, remember that even a PLUS loan is much cheaper than other types of private lending, for example, using a credit card to pay tuition or taking out a private loan from a bank. Yes, you can do that too, but check all your other options first.
Consolidation loans will begin calling immediately after graduation. You’re going to have to make the decision whether to consolidate based on a number of factors, including how organized you are, how much you owe, and what the interest rates on your loans are. If you managed to get Perkins, consolidation would probably be a poor choice, because generally it would waive the dismissal agreement. However, if you’re carrying a large number of private loans, consolidation loans capped at 8.25% interest might be preferable.
Student loans are the first big financial decision most people face. Just take a deep breath, ask questions when you don’t understand, and avoid the temptation to rush through the fine print. You’ll have a much easier time figuring out how to pass your classes when you know that your tuition is covered, and with careful management loans are truly an investment in your future.