The United States of America is a great country.
But for some things, it really sucks (for lack of a better word).
And some of those things include paying for higher education.
In other countries, taking out loans for tuition is unheard.
In America, well it’s the opposite.
Unless you’re the lucky few, student loans are inevitable.
Though, a crushing student debt can be avoided.
But how can you avoid an average of $35,000 in debt?
Make sure you don’t commit these 9 student loan sins (listed in no significant order).
1.Having A Bias Against Two-Year Degrees
It’s almost expected for high school students to go straight to a four-year university.
But is that really necessary?
Knocking out the gen eds at a community college can relieve much financial pressure on the family.
A two-year degree can open up a lot of career choices as well.
Did you know that a stenographer with an average income of $48,000 doesn’t require a degree?
Look into some alternatives.
You might not even need student loans.
2. Not Applying For Financial Aid
Student loans are a type of financial aid.
There are others though, such as scholarships and grants.
The Free Application for Federal Student Aid (FAFSA) is a great tool as well.
Some people don’t consider it.
They feel there’s no point or think they won’t qualify.
But no matter what your financial situation is, you should still fill it out!
Why?
Well, it’s free.
It’s simple and doesn’t take too long.
Contrary to popular belief, there are no income, race or age requirements.
You’ll be surprised at how many people qualify for at least some type of aid.
And any aid is better than none at all!
3. Not Researching Loan Types
In addition to the federal loans, there are also private ones.
All of these include many headache-inducing numbers.
But it’s definitely better to research well now than try to figure it out later.
4. Not Researching Repayment Plans
You don’t necessarily need to pay thousands each month.
Choose the right repayment plan for you.
Repayment plans either allow you to finish paying quickly, or have a small monthly payment.
These plans are confusing and complicated.
For clear understanding, take a look at these charts.
Your payment amount is usually a percent of your discretionary income.
Depending on your income, you might not even have a monthly outflow.
For all plans, remaining loan balance after the repayment period is forgiven.
Depending on your income, you might finish paying before the period is up.
5. Not Knowing Your Loan Balance
When you finally check your loan balance after graduation, it might be a huge shock.
To make things easier, try calculating earlier.
Having an idea of what you must pay can help you plan and make a budget.
It makes the debt easier to handle.
Knowing what you owe is the first step to paying it off.
You can find this information at the National Student Loan Data System.
6. Splurging With Student Loans
This might be common sense, but student loans are for your college tuition.
Or school related things, such as housing, textbooks, and your meal plan.
Don’t spend it on a spring break outing with friends.
If you need some extra money for spending, maybe you should get that second job.
Most universities offer on-campus jobs.
It’ll look great on your resume and ease up on your future debt.
7. Having Overdue Student Loan Payments
Making on-time payments will come as a huge relief later.
A defaulted student loan will stay with you for your entire life.
It can ruin your credit score and federal income tax returns.
It might even affect your social security benefits.
If the payments are too much, contact your loan service agent.
Do it before it’s too late.
If remembering to pay is the problem, set up automatic payments.
8. Ignoring Your Other Loans
Need a new car?
Want to move out of your parents’ home?
Love swiping that credit card?
After graduation, you’ll probably have multiple debts on your hands.
Though you need to pay off your student loans (see point above), don’t forget about your other loans.
Don’t let your other high-interest loans add up.
Sometimes, the other debts can take top priority.
In other words, keep track of all your financial responsibilities.
Budget well and be a successful adult.
9. Cosigning Blindly Out Of Love
This point is for the parents and guardians.
You may qualify for a federal Parent PLUS Loan or help your child with their loans.
Do keep in mind that if your child cannot repay, you’ll be responsible.
Private loans might allow the co-signer to be released after some payments, but the process is complicated.
Make sure you only offer what you can afford.
And make sure you read the fine print.
Now you have an idea of how to tackle student loans.
In summary, be clear on all the different types of loans.
Know your responsibilities and opportunities.
As long as you keep these points in mind and research well, life with a diploma will be a breeze!
[…] Even established professionals have issues with student loans because they follow you for years. […]