When it comes to student loans, there are common mistakes that college students make. Knowing the common errors can help you make the right choices when it comes to taking out loans and help you to avoid falling into debt.
The first mistake most freshmen make is thinking that they need loans when they do not. About 60% of students borrow each year to cover their college expenses, according to the Chronicle of Higher Education. Instead of taking out a loan, you may want to consider going to a cheaper school or paying in cash. It would also be an advantage to check all scholarships or look into work-based school that you can attend for free. To avoid taking out a loan, you may want to take a year off in order to save money to pay for expenses when you can go back or work part time while you’re going to school.
Don’t automatically assume you will need student loans. Before applying and accepting a loan, be sure to search for every grant or scholarship you could use. You will have to spend time on the internet or talking to a librarian since they usually have access to scholarship databases but it can be worth it. Also, be sure to look at schools that offer good scholarship programs so you can obtain as much money as you can to cover your expenses.
Many students usually do not need the full amount of money from their federal student loan offer that is received after filing the FAFSA. If you are attending an expensive school that you cannot afford, you may need the full amount of the loan to cover all of your expenses. However, most students, especially at state schools, do not need the entire amount, even with room and board included. Often times though, most students still take advantage of the full amount for miscellaneous activities or because they do not know that they can accept just part of the loan. Instead of using the loan to pay for books or other expenses, consider a part time job to save you money.
Before accepting a loan offer, be sure to calculate how much your monthly payments will be. This is one reason why it is important to keep track of your paperwork. You will need to keep your paperwork handy in order to keep track of your debt and so you know where to send your payments. If you do lose your paperwork however, use the National Student Loan Data System so you know who services your loan.
You may also want to consider starting to pay interest on your loan while you’re still in school. Your interest is likely to start accruing as soon as the loan is taken out and will capitalize so the outstanding interest will be added to the loan’s principle. Even paying part of the interest can help you avoid paying more money in the long run.
It is also a good idea to check out private loans and ask your parents to co-sign on the loans you do take out. Also, be sure to keep your address updated with your loan provider and choose a payment plan that is realistic for you.
Explore all of your options when it comes to accepting student loans. Keep track of your paperwork, calculate realistic payments, and determine how much money you really need to help get you through school.