A large majority of students will require financial aid at certain points in their academic careers. One of the main ways people access financial aid is by applying for student loans, but doing so can be confusing at times. Here are six things you need to know about student loans.
- You Can Take Out Federal Or Private Loans, Or Both
People can apply for two different types of student loans. You can apply for private loans with a private lender, such as a bank. These loans are based on credit scores and histories. If a student borrower isn’t creditworthy, many of these loans allow the applicant to have a cosigner, such as a parent. Federal loans, on the other hand, are issued by the government and are based on an individual applicant’s financial needs and income bracket. You can take out both types of loans if you want or need to.
- Factor Fees And Interest Rates Into Your Decisions
Remember, loans include interest rates and various fees. This means that you’re going to be paying back more than what you initially borrowed. Depending on the loan, you may be required to start repaying it before you complete your schooling, but all loans will accrue interest over time until they are paid off. Remember to factor all fees and interest rates into the decisions you make regarding your loans. This will help you take out loans you’re sure you’ll be able to repay.
- You Need To Know Who Your Loan Servicer Is
While you don’t need to be in contact with your loan servicer until you begin repaying your loan, it’s a good idea to determine who your loan servicer is and know how to get in touch with representatives before you begin making payments. Your federal loan servicer will be assigned by the federal government, so that contractor should contact you. If you have private loans, you should check with your lender to see whether the lender or a third party will act as your loan servicer.
- Think About the Big Picture And Your Long-term Needs
Avoid thinking about your loan in a vacuum. Although you don’t need to worry about paying it off while you’re attending school, you should still think long-term when it comes to making sure you can repay what you borrow. Consider how much your educational expenses will cost and research the average salary for someone in your chosen career or industry. You want to avoid overborrowing, particularly if your career plans involve a job that may not pay well.
- You May Be Able To Take Advantage Of Different Repayment Options
There are options for people who need assistance repaying their loans. Depending on your situation and needs, you may be eligible for loan refinancing and consolidation. If you have federal loans, you may be eligible for specialized repayment plans, such as income-based repayment plans. If you have private loans, talk to your lender or loan servicer about your options.
- Be Aware Of What You Can Use Your Loan To Fund
Most people put their student loans toward their school tuition, but you may actually be able to use these funds for other things, as well. Check with your lender or review the terms and conditions of the loan for any restrictions or requirements. In general, you can use your loan for most expenses that are related to your education. Such expenses include room and board, school supplies and transportation costs. You may also be able to use your loan to pay for groceries and certain personal supplies.
If you’re thinking about taking out student loans, make sure you research your options carefully. You need to apply for loans that make sense for your financial needs and situation. You also need to be aware of any changes in your financial situation while you’re borrowing or repaying the loan and accurately communicate any changes to your lender or loan servicer.