The biggest mistake when getting a student loan is not starting to pay it back as soon as possible. Once your loan arrives, there is usually a bit extra that makes it into your bank account. Resisting the temptation to use that on living expenses and paying it right back to the loan company will help you in the long-term.

 

When you see what your tuition costs are from your course schedule in the next semester, you will know what the cost of courses and books will be. Federal loans come in bulk amounts based on your year in school, so you know what money is possible to borrow. You can borrow that entire amount or less than that amount, but not more. Private loans can make up a difference if you can get them.

 

Federal loans are possibly going to have stable and lower interest rates than private loans. You most likely will not need a cosigner for those loans. Private loans might end up costing you more in the long run. If in the future you have severe financial problems, federal debt may not be forgiven in a bankruptcy, but you might be able to discharge a private loan.

 

Lenders look at your current status at school. You will need to be taking a certain amount of credits to get a certain amount of loan money. If you are in graduate school you get more potential money offered than if you are in undergraduate classes.

 

Consolidating your loans while you are in school might not be the smartest plan. If your loan package comes with smaller loans that you can pay off separately, you would be better off doing that as soon as you graduate than consolidating them together for a lower monthly payment. If you can’t make your monthly payment when you graduate, consolidation can lower your overall monthly payment.

The best kind of loan is the one with the lowest interest or that can be forgiven if you are going into a job that will pay your loans back. Federal loans around 6.8% are a good standard to see if private loans can match or beat that rate.

 

Life happens to all of us. Deferment is natural and loan companies are prepared to allow you to miss some payments as long as you communicate with them ahead of time. Deferment is very common, and for subsidized loans, interest is not charged while you are in school. Once you graduate, its time to start paying back as soon as you can so that the amount of the loan does not increase. Miss too many payments and you go into forbearance. The companies will still be expecting their money, but there are programs and help from the loan companies that can help you even if you can’t pay. Federal programs like income-based payments seem to be coming in the near future. Other countries are already doing this very successfully.

 

Some careers will allow you to not have to pay back your loans if you work for a certain amount of years in a certain location. I graduated as a social worker, and I could have worked for seven years in a rural county somewhere or in a low income area and my loans would have been wiped away by the government. Teaching in certain schools offers a similar deal. Those decisions are worth thinking about if you are committed to a certain area and can handle the work.

 

The best advice I can give is that loans are not the worst thing, but delaying to pay on them makes them the monster you hear about. Interest on unsubsidized loans grows from the second you take the loan out, so be aware of the details with your loans and try to pay them back as fast as you can.

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