Author: Shiloh Kelly
Student loans assist students in paying for college, filling financial gaps, and helping with education fees. As a college student, you’ll need to fully comprehend how student loans work to make informed decisions about funding your education.
This article provides insights on what you need to know about student loans and how to apply for one.
What Should You Know About Student Loans?
According to the Institute for College Access and Success data, two out of every three students graduate from college with debt. As a result, there’s a good chance you’ll need a loan, whether for tuition or school expenses.
Here are a few things you should know before applying for student loans.
Consider Federal Loans
Federal and private loans are the two most common types of loans. You might want to consider federal loans over private ones because you don’t need a credit history to qualify. They also include income-based repayment plans and debt relief that aren’t available with private organizations.
Additionally, you may be offered subsidized and unsubsidized federal loans. While subsidized loans do not accrue interest while in school, unsubsidized loans do.
To apply for federal student loans, follow these steps:
- Fill out a FAFSA (Free Application for Federal Student Aid) form.
- Your school will send you a financial aid package based on your results, which may include student loans.
- Before receiving your loan funds, you must complete entrance counseling and sign a master promissory note.
Borrow What You Need
Student loans can help you pay for school, but you’ll have to pay them back with interest eventually. As a result, you’ll want to keep your loan as small as possible. Aim to borrow enough money to keep your monthly payments at around 10% of your projected after-tax income. Looking up average salaries in the US Department of Labor’s Occupational Handbook Outlook can help you predict future earnings.
If you’re still in school, you can begin making payments, no matter how small they are. Making small payments while still in school can help you pay down your debt and save money in the long run.
If you are given a student loan, there are some things you can do with it. For example, you can use your student loan to pay for things like transportation, study abroad programs, off-campus housing, and groceries. However, you cannot use it for vacations, entertainment, or takeout.
Know Your Servicer
When you take out federal student loans, the government assigns payment management to a loan servicer. While you’re at school, find out who your servicer is and ask any questions you have before the first bill arrives. You’ll also need to go to them if you have any problems making payments in the future. In addition, you will receive your first bill six months after graduation.
If you’re considering getting a student loan, whether private or federal, visiting your school’s financial aid office is advisable. They can work with you and your family to strategize a plan on how to get the loans you need.