Read This Before You Apply For Student Loans
This will be like ripping off a Band-Aid. Read through this quickly so that it’s basically painless, and you’ll then have the ability to tackle loans in a smart way later. You got this.
There’s a topic out there that - regardless of age, income, or education level - is almost always met with a groan and a grimace, particularly in the United States. No one likes them, no one likes talking about them, yet they’re the reality of so many current and former students:
Student loans are so commonplace today that many of us don’t think twice about them. Many Americans don’t understand the loans that they are signing up for, but these same loans can have significant power over their lives. This debt can affect one’s ability to purchase a home or their eligibility for a car loan. It might even make someone hesitant to accept certain jobs or change jobs due to uncertainty about being able to afford the loan payments.
Whether you are about to take major student loans out, have yet to start paying them off, or are well into your journey of loan payments, this is the perfect time to be thinking about your future with student loans.
If you still have to use loans to pay for school, there are ways to make educated choices to ensure you do not get hit with an unexpected, astronomical bill when you graduate. And if you already have loans? It’s not too late to discover ways to get them under control and keep them from controlling your choices. Time to get loan savvy!
Figuring out INTEREST RATES.
The first thing to understand is the interest rate of the loan. Just as your money can grow significantly through the power of compounding interest, a loan with a high interest rate will cost you considerably more over time.
If your loan has an interest rate of 12%, you will have to make higher monthly payments or pay over a longer period of time compared to the same loan with a 5% interest rate.
We all have better things to do with our money than to pay extra interest bills! If you are taking out a new loan, avoid high interest rates. If you already have a high-interest-rate loan, you might be able to renegotiate the interest rate or move the loan to a new company for a lower rate.
And now, picking the right LOAN TYPE.
Did you know that some federal loans are forgivable? Individuals who spend 10 years working in public service while paying on their loans consistently (120 consecutive payments) might be eligible to have their federal loans forgiven.
If you plan to work in public service after you graduate, this is a path to consider. If you have private loans, these might not be forgivable, but you may be able to consolidate them to make them more manageable.
In addition to looking for a way to lower your interest rate, you might consolidate your loans to eliminate confusion.
If you accumulated 10 loans of various amounts, from various companies, over 4 years at school it is confusing to keep track of the interest rates and due dates!
This is a good time to consider consolidating all your loans into one – with the lowest possible interest rate of course!
Finally, do you need a COSIGNER?
It might seem like an obvious decision to ask your parents to co-sign your loan with you. However, this also has the potential to create family tension. If you are unable to make a payment, this doesn’t just reflect badly on you – it also affects your co-signers and their credit and future.
To be sure everyone is on the same page, before adding a co-signer to your loan make sure you have set the ground rules: What is the safety net if you are unable to make a payment? How will you pay your parents back if needed?
If you already have co-signers on your loan and you have made your monthly payments, you could potentially re-negotiate to have them removed! This could be a financial relief for your parents while also putting you in control of your money.
It’s never too early or too late to think about your financial future. Since student loans will play a huge role in your life, now is the perfect time to become loan savvy and make sure you are getting the best loans or renegotiating any existing ones if needed.