Student Loans: Six Things To Know Before Applying For One

Any kind of loan can jeopardize your financial plans. Being in debt for years and trying to repay the loan prevents you from making your own financial goals a reality. Apart from all kinds of loans, a student loan is perhaps the most common one. It is also the one loan that has been crippling the American population in recent years. Hence, it is best to know what you are getting into before taking the loan. Here are a few essential things to keep in mind before getting a student loan. Whether you are a student or a parent, ignorance can’t be bliss for this one time.

It Is Part Of The Financial Aid Package

When we hear about certain schools providing financial aid, we think of it as grants, scholarships, and a few other academic opportunities that won’t require you to shell out money. But in reality, it includes a student loan, too. So it is wrong to assume that everything included in the list comes for free. The loan needs to be repaid after graduation. Go through each thing that has been listed there, and if you have any confusion, call up the school authorities to understand it better. If you assume that something is free and later have to be in debt for that, it can be detrimental for your future finances.

The Two Types Of Federal Student Loans

Did you know that there are two types of federal loans – subsidized and unsubsidized? The subsidized loan is for students who need financial aid, and the government pays their interest that has accumulated while the students are in school. Unsubsidized loans are available for all students regardless of their financial status. As expected, the interest for these loans is paid by the student only. If you want to know what kind of federal loans you are eligible for, you need to submit a FAFSA.

Apply For A Private Loan If Federal Loans Do Not Cover Your Entire Cost

Even if you are eligible for financial aid or an unsubsidized federal loan, the amount might not cover your entire expenses. If that is the case, look for private loans. Most schools will have a financial aid officer who can help you find about their preferred lender’s list. In case you are new in the area, this list will save you some time. It will also give you an idea about the amount of money you might need to pay up as interest every month.

You Don’t Need To Pay It Back Immediately After Graduation

Though it might seem like you need to pay back your loan right after graduation, it doesn’t work like that at all. Thankfully, for borrowers, there is a six-month grace period, and during this time, they don’t need to pay anything. In case you don’t have any savings, this is the time to get a job and prepare yourself to start paying it off every month. Draw up a budget which will facilitate you to pay the loan.

Your Student Loan Can Be Forgiven

Did you know that your student loan can be forgiven if you meet a few criteria? If you can get a job within the public sector, especially at non-profit organizations or public services like military, teaching, or law enforcement. Hence, if you want your loan to be forgiven, maybe you should aim to get a job with the government. Do check out all the terms and conditions though, so that you can prepare accordingly. This is perhaps the best way to terminate your loans, for, unlike other loans, a student loan cannot be voided through bankruptcy.

Don’t Borrow More Than You Need

It is important to find out the exact amount of money you need to pay up for school expenses. If you can do that, you should borrow exactly that amount and no more than that. You should also keep in mind how much you would need to pay back with interest. If the total amount seems too much to handle, you must borrow less. Don’t bite off more than you can chew.

Student loans are not just important, but it is likely to be the first loan you’ll ever apply for in your life. If you can handle this correctly, you can avoid all the issues people usually face with their loans.