Going to college will be an exciting time, but it may also be very expensive. Before you can start your first day, it is important to understand the ways you can finance your education. Most undergraduates leave college with $20,000 in debt, but students at private or out of state universities can carry as much as $100,000 in debt. Proper comprehension of student loans and the loan request process will greatly reduce your debt.
Start the process by determining how much money you need to borrow. Your expenses can include housing, tuition, supplies, textbooks, travel and additional expenses. Some undergraduate tuition packages include food and housing, so be sure to find out if this is the case at your school. Once you have a final amount, talk with your family to see how much they can contribute. Finalize any grants, fellowships or scholarships that will reduce your total. Once these amounts have been subtracted, you will be left with the amount you need to borrow.
Research your loan options. Find out about the interest rates, duration of loans, variable interest rates, penalties for late payments and any deferments for which you could qualify. Investigate loan forgiveness, repayment options, grace periods before repayment and what happens if you cannot pay your loan.
Next, learn about your student loan options. There are three basic kinds of student loans – Stafford, Perkins and private loans. Stafford loans can be unsubsidized (financed by a private lender) or subsidized (financed through the government). Learn the difference between these two options and how much you can borrow each year. Perkins loans are locked into five percent interest rates and your college will pay the interest while you are in school. Private loans should only be used to cover what the federal loans do not. Understand each lender’s repayments structure before you apply. Consider asking a family member to cosign your loan to help get a lower interest rate.
Now, you are ready to start taking out your student loan. If you do your research, fill out the necessary paperwork and keep track of all your records, you will have a good experience with your student loans. Do not let the process intimidate you – it will be only one small part of your great college experience.