Student Loan Pitfalls: Dangerous Default

Financing Your Education:
Your Future Is In Your Hands

Introduction

One of the most important decisions you can make in your life is how to pay for your education. Education as you may know is a very big thing for all of us. It is the key to our success. But, oftentimes this “big thing” is ignored because of financial problems. Thanks to some schools and institutions out there that financing your education can now be made possible. However, just as you investigate which schools have the best programs for you; it is still necessary that you gather information about how best to finance your education and your future.

Invest While You Can, But Be Careful!

It is often said that your education is a major investment in yourself. It is an investment of both time and money. You may be spending your limited resources now in the hope that you will realize a somewhat positive outcome on your investment in the future. It is best that you consider the time as well as money you will invest in your education, but along with this, the personal and professional goals you’ve set for yourself must also be given attention. Then, it is now time to make the best investment you can. There are some lending companies or persons you know who will support you where you can borrow even just the minimum amount necessary to fulfill your education aims. It is through this way that you will realize your financial and career goals as it maximizes the net return on your investment.

Perhaps it is also necessary that you consider some preparations for the financial aspects of your school, just as you are preparing for admission to and enrollment in the school of your desire. Many experts often say that even if your parents may be willing to carry your financial paperwork or any financial burdens there may be while you are in school, it is still best that you understand it too and become at least an equal participant in financing your education. In case you don’t, you may find that financing your education can sometimes become overly confusing and complicated. Note that while you are in school and even after you left, you will be the one signing the promissory notes for any loans you borrow in order to finance your education. This just implies that you yourself will be legally responsible for your loans. Thus, understanding the terms and conditions of the loans you borrow will help you get out from any problem during the repayment period.

Questions to Ask Before Your Borrow

Before you borrow, it is necessary that you get answers to the most possible, important questions as you plan the financing of your education. The necessary questions to consider are the following:

1. What should I be doing now to get ready for meeting the cost of my education?
2. Are there eligibility requirements that I must meet in order for me to obtain support for my degree? If so, what are they?
3. What specific financing alternatives or programs are available to me at the school where I plan to apply?
4. How to apply for financial support and what applications are needed?
5. Is there a right time to apply for financial aid? When should it be and what are the application deadlines?
6. Will my parents be expected to provide any of their financial information or contribute to the cost of my education?
7. What they will do with the information I and my parents provide?
8. What necessary and unnecessary points should I know about the assistance I am offered like student loans, grants, or work study?
9. Is there any move that I can take to lessen the amount I have to borrow, yet still attend the school of my choice?
10. What do I need to consider or do once I arrive on campus to minimize how much I borrow?
11. What choices will I get for working while attaining my degree?
12. What possible impacts will the loans I borrow have on me after I graduated from college?

As you may notice, some of the above mentioned questions are general. They apply to any school you might attend. However, others are more specific to the programs, policies and procedures of every school you may be considering. So, what is best to do with these questions aside from seeking for answers is to evaluate these issues as you explore your financial options, in spite of where you plan to attend school. It is somehow worthy to note that financing your education requires a collaboration involving yourself, your family, as well as the school you attend. Your lender may also play a great part on it. Answering such questions should provide you the information you will need to make well-informed choices about how to finance your education, other than how to make the most of your education investment.

Where to Seek for Answers?

One of your most important resources to use in answering the above mentioned questions is probably the financial aid administrators at the schools you are considering. However, there are also some consult publications from funding organizations out there where you can seek for answers. Examples of them could be the state governments, lenders, and scholarship granting organizations. Several financial aid guidebooks are also available today from your local bookstore.

Perhaps another valuable and updated source of answers to such questions is the Internet. As you may know, many schools today have their own websites, which often cover information about the financial aid. Most of the lenders and other funding organizations even have websites as well. Typically, they offer information about financing your degree, the importance of good credit, managing your student loans while in school, and even repaying your student loans. There are also some interactive calculators online these days to help you plan your in-school and out-school budgets. These calculators are even useful when it comes to projecting the cost of your student loans.

Lastly, several websites that have been established by government agencies and other organizations to aid students with financing their education are now accessible. As often said, they may be a good place to start your search.

How Much Should You Borrow?

So you’ve found answers to those questions, do you? If so, it is necessary to note that before you place and strike your pen on any promissory notes, you should first take an organized step and identify how much you will really need to borrow.

There are actually several factors associated with the dollar amount you should borrow. Usually, the amount will greatly depend on the cost of attendance as established by your school; on the student loan limits established by the federal government and other student loan lenders; on your outstanding financial commitments like car loans or mortgages; other resources you may have such as savings accounts; and on the amount of the debt you can afford to repay once you leave school. Also note that the sum of these parts equals an educated estimate of your student loan amount.

Factors to Consider for Borrowing

Under the accepted standards of borrowing student loans, it is stressed that you can borrow up to the cost of attendance, as determined by your school, less other financial assistance you might be receiving. Other financial assistance refers to grants, work-study, and scholarships. And, the cost of attendance typically involves tuition, books, fees, room and board, and other miscellaneous living expenses.

Also, the cost of attendance as determined by your school has figures that are meant to apply to a wide group of students. Oftentimes, you may not need to borrow as much as your school allows. Note that it is best to borrow the minimum amount possible so that you can lessen your overall financial obligation later. Nevertheless, if you find that you really need a student loan amount that is more than the school has allotted, you actually have the right to appeal the decision. But, this is permitted as long as you do not surpass the maximum amount as established and maintained by the federal regulations.

If you prefer to consider borrowing student loans to finance your education, just expect that some of the lenders these days have borrowing limits placed on student loans. For instance, the federal government places annual and aggregate borrowing restrictions on federal student loans, and the aggregate limit is usually the total amount that every student can borrow in the span of his or her education. Given this fact, it is then necessary to examine and evaluate the terms of every loan you plan to take on for the annual and aggregate loan restrictions.

Aside from that, carefully and honestly assess your current financial status, including any financial commitments you have made before entering the school of your own choice. Understanding the repayment obligations of every commitment you’ve made is the key here. Note that over time you will be responsible for these prior obligations in addition to any education debt you take on, and your education loans are not given to cover these prior obligations you have.

Finally, consider the realistic determination of your future income. You can perform some research on the current job market and start salaries in the area you plan to pursue. Just note that you will be paying for your education with your future income. So, when choosing a student loan program, be sure to do some investigations on the loans that offer you alternative repayment plans which can assist you in managing your payments, especially early on in your own career.

Conclusion

As mentioned, student loans can be a valuable investment, but they are also an important obligation that needs to be considered. In order for you to ensure a successful student loan repayment, you must make sure that you approach borrowing carefully and thoughtfully. This must also be coupled with being realistic in your own budget as well as salary projections.

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Borrowing Student Loans Responsibly

As you may know, student loans are today’s largest form of student aid. Researches have found out that it made up to 54 percent of the total aid awarded every year. However, with the rise of student loans, several cases of student loan defaults occur. The student loan debt is even today’s one of the major problems of most student borrowers. It is rising every year and the college expenses as well as the graduate school costs have definitely gone up faster than inflation. Well, let me tell you that this case often surface when you take a particular loan then another student loan followed by another loan. It is often said that as much as you take student loan offers, your loan debt gets bigger and bigger.

Since the case for student loan debt always happens and it carries certain burdens to the attainment of the student’s dream of higher education, it is then important that you consider some steps that will help you lower or manage your debts. Perhaps one of the most necessary things to consider is to borrow loans responsibly.

Think Before Your Borrow

Many people find it easy to rush through the student loan process. However, if you take a minute considering some of the money saving tips mentioned below, you could save yourself some bucks in the long run. So, read on.

Falling Into the Loan Trap? Oops! Avoid it!

Most of the time, you may find it tempting to borrow up to the maximum amount. Well, this is what many people call as the “loan trap”. It is the case where you borrow the maximum amount of money from the student loan lending company or institution even if it is more than you can afford to repay. It often occurs for the fact that need-based loans are very easy to apply for and they don’t usually require payments while you are attending your degree. So, to avoid certain consequences as you enter the repayment period, you should avoid the loan trap.

How Much Loan Do You Actually Need

Before you consider borrowing a student loan for your college, think first how much loan you really need. Always note that when taking out student loan, you don’t have to borrow the entire amount which is usually specified in your award letter. Just borrow what is enough.

Reduce Your Loan As Much As Possible

There are several options available for student loan borrowers. But, before opting for one, it is necessary that you question yourself if you can hold down the expenses; if you can work more, either in the academic year or during vacations; or if there are scholarships available for you. It is often said that if you minimize spending or bring in more money, the amount you have to borrow for your education tends to go down.

Consider Student Loans with the Best Terms

Note that the lower the interest rate, the less pricey the student loan is. This actually means, the less you will have to repay for your student loan debt.

For your own sake, here is what your batting order should be (from the least expensive):

Student Loans

1. Federal Perkins Loans

2. Federal Subsidized Stafford or Direct Loans

3. Federal Unsubsidized Stafford or Direct Loans

4. Alternative or Private Loans

As you may know, most of the students thinking for student loans have access to a special loan source these days. These sources, like the Air Force Aid Society, have student loans terms that are comparable to the Perkins or Subsidized Stafford or Direct Loans. Of course, it may be worth your time to look into the possibilities. There are some sources these days that offer low-interest student loan programs, and perhaps one of the most resourceful is the College Board’s online Scholarship Search. 

Parent Loans

1. Federal PLUS Loans
2. Private Loans or Alternative Loans

As mentioned, there are two available forms of education loans for parents. These programs are what commonly offered by some colleges anywhere in the world. But, for great chances of availing the benefits of such programs, it is best to check with your financial aid office to see if the school you wish to attend offers its own loan program. This will also allow you to know if you qualify for the loan, before you submit a PLUS loan application.

How Much Should You Borrow?

Many experts agree that you should borrow only as much as necessary. As mentioned earlier, it is often tempting to borrow whatever you are offered or are eligible to borrow. However, it is necessary to think first carefully about hoe much you really need, as well as to consider other possible options.

Always note that there is actually no need for you to borrow the entire amount shown in your award letter. And, even more important is that, never plan to borrow as much as you can up the yearly limits because if you do so, expect yourself to be deep down in debt.

Consider Options That Will Reduce Your Loans

If you are thinking for borrowing money to support your education, try to ask yourself first if you have savings left that you can use instead of taking out a student loan from the school of your choice. Also, think if you can get by with less by way of holding down expenses, or if you can do something great, like working more, either in the academic year or during vacations just to support your education. Also, think for the possible scholarships that you can apply for, or you can be qualified for. There are actually a lot of options left for you out there. The best move to take now is to know and understand them.

Estimate Your Loan Payments

It is worthy to note that the more you borrow for your education, the higher is the amount of your monthly repayments will be once you finish your degree. So if possible, try to estimate your loan payments. There are a number of student loan repayment calculators out there that you can use to do the math. What’s more, you have the chance to calculate your monthly payments based on the estimated starting salary of your chosen occupation.

The Essential Borrowing Tips

Now that you have pondered enough about your student loan with the things you have to consider before borrowing, as well as with the amount you need to borrow, I guess it is now important for you to look at the most recommended tips for borrowing student loans. Just consider the following:

1. Start by looking at the award letter given to you by your servicer. From the letter, figure out which need-based loans you have been qualifies for and for what amounts.

2. After looking at the full financial picture, such as the awarded aid, education cost, and family share, you should then consider settling on an amount that you actually need to borrow.

3. The rule is: never borrow more than you need. Always note that as a student loan borrower, you are not required to take the full amount of the loan you have been offered.

4. Don’t ever forget about student employment as an alternative for borrowing. Even though working at a job can seem like an extra burden for students, so is struggling with high loan repayments after college.

5. Apply for the student loan right away. This is very necessary especially if you want to ensure that the loan is approved as well as the money paid to the college before you have to make your first student account payment.

6. The key to successful application is to follow the loan application instructions carefully. Note that any mistakes you make will delay receipt of the funds.

7. When you are applying for a Stafford or Direct student loan, be prepared for the amount that is paid to the college to be less than the amount you signed for. Usually, a fee of up to four percent will be deducted from the student loan. This deduction occurs before the check is sent to the college of your choice.

8. If you already figured out the exact amount you are borrowing before any borrowing process begins, you should start keeping track of your student loan tab, which is what your monthly repayment amount will be after you graduated from college. There are student loan calculators out there than can do the math for you.

9. If instances occur that you find yourself needing more than the amount that’s been offered in your award letter, it is necessary to contact with a financial aid counselor before taking on an additional loan.

10. And, if you do take on an additional, unsubsidized loan, just consider making interest payments while attending your degree. The interest won’t be much and this will help you save money. If you delay or capitalize the interest payments, you will end up having to pay back significantly less than.

As mentioned, planning and thinking your moves for taking out student loans is very necessary for a successful borrowing. If you do consider what have been mentioned above, then there is no doubt for you not to attain your dream education, and even a successful career in the future.

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