With college just around the corner, the question most parents and students are asking is ‘How am I going to finance my education?’ With the cost of higher education on the rise annually, the number of people able to pay for school out-of-pocket are becoming few and far between. Instead, many families are turning to financial assistance in order to get through those important four years of academic instruction and potentially beyond.
Private, Federal and University-based programs are more than willing to lend large amounts of funding to students who fall within the income guidelines or meet school requirements. While you’re in school, these loans can be a lifesaver—you hardly have to worry about your bank account and tuition is covered hassle-free. The problems tend to start once you graduate and reality sinks in. When repayment time rolls around on college loans, many students begin to rethink financial choices they made years ago. In order to avoid monetary regret, here are five questions to ask yourself before taking out student loans.
Is there another route to financial coverage?
It’s never easy to ask family members or friends for money, but it when it comes to covering the cost of attending school, if you have someone who is willing to spring for a personal loan, you’re going to save a lot in the end. While taking out a student loan with a Private company or Federal program may sit easier with your conscience, it definitely won’t be easier on your bank account in the long-run.
Many student loans earn a significant amount of interest over time and when it comes time to repay them, the amount can be quite higher than what you started out with four years previous. If there is someone who is willing to help cover a part of your educational bill, definitely take them up on the offer. You’ll be able to pay them back in a comfortable amount of time without the added pressure of high interest rates once you graduate. Similarly, you’ll eliminate the potential of defaulting on loan payments each month, which can adversely affect your overall credit rating.
How much are you willing to sacrifice on interest?
If student loans are your only option when it comes to financing school, be aware that different loan programs offer loans with drastically different interest rates. While Private companies tend to be more flexible when it comes to covering costs, their interest rates are nearly always higher. When possible, try to stick with Federal loans as a way to ensure a lower interest rate and overall easier management post-graduation.
Do I have a repayment plan?
The benefit of student loans is that they cover your expenses. The disadvantage is that all good things must come to an end, and one day, you’ll inevitably have to pay back everything you’ve spent. Depending on what type of institution you attend, this can be an overwhelming amount when you start off with an entry-level salary after graduation. Sit down and do the math before you sign on the dotted line, and make sure you have a repayment plan in place in order to avoid unpleasant monthly bills that catch you by surprise.
Can I lock in my payment and interest rates?
Too often, students are so excited to get started with school that they say yes to student loans without considering all of the facts. Before you take out a student loan, it’s important to check with your loan provider as to whether or not your repayment rate and interest rates can be locked in at a set price. Some private loan companies will hand over large amounts of funding that come with drastically fluctuating repayment plans and soaring interest rates that can’t be solidly established. Make sure to avoid loans that can hold you hostage in the future with unruly payments and out-of-control interest rates.
Are there grants available through my school?
While it takes a dedicated researching effort, most colleges and universities offer a significant number of scholarships and grants to students for a variety of reasons. Before you take out loans you’ll have to pay back, be sure to see what type of grants your school might offer. Grants are funds that go towards your tuition that you do not have to repay after you graduate. They range from academic to personal grants and could be the key to keeping money in your pocket after graduation.