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Things To Consider Before Getting A College Loan
So you’re getting ready to go into college. You’ve already decided on what course to take and to which university to take it. All are sorted out except for one thing, how would you pay for your college bills?
According to a study, around 46% of the students going into college would be taking student loans, and roughly 7 out of 10 still have debt when they graduate. So why are students putting themselves into debt?
Nowadays, it is a very competitive world out there. Finding a job is not that easy. Graduating with a degree gives you a higher chance of getting a high-paying job; hence it is understandable why most students are taking the risk of getting a loan to study. Before you pull the trigger, here are some things that you should consider before getting a college loan.
Look For Different Loan Options
Don’t take a loan just because someone offered you. You need to consider that you will be paying this no matter what happens, so it would be wise to choose a loan option that would not be that much of a burden for you even after graduating.
There are two types of loans you could consider, federal loans and private. Of the two, you should try and consider taking on a federal loan first. You can do this by completing the FAFSA or known as the Free Application for Federal Student Aid. Choosing this first is a wiser choice since it does not require you to have any credit history to qualify.
Federal loans also have a more flexible repayment plan compared to private loans. There are two types of federal loans which are subsidized and unsubsidized. Subsidized loans build interest while you are still in college, while unsubsidized ones don’t.
Do Not Borrow Money You Cannot Repay
When trying to decide how much you need to borrow, there are a few things you need to consider. Regardless of whether you’re taking a federal or personal loan, check what is the maximum amount that you can borrow.
Next, make sure that you only borrow around 10% of your projected monthly income. This would allow you to have a more reasonable amount to pay. Universities have a financial aid office that helps students create a strategy on how they could start a loan and repay them.
Remember the Interest Fees
Some students forget that when they take a loan, it comes with interest. Federal loans have a fixed interest rate, while private ones are based on your cosigner’s credit history. You need to consider this when taking a loan, as this would add to the amount you have to pay off.
Understand the Impact Of Having A Debt
Before you take that leap of faith, you need to think about the effects of having debt in your life.
On the positive side, taking out a student loan will help you focus more on your studies as you don’t have to worry about how you will pay your bills. At the same time, it would let you have a degree that you can use in the future to your advantage.
Now, the downside of this is that whether you get a decent job or not, you have to repay your loan. Defaulting on a loan payment has serious consequences as it could affect your credit record, which would deny you any financial aid in the future.
As for the federal government, they could garnish a portion of your wage and even withhold your tax refunds. That is why it is very important that you understand what you are getting into. You need to weigh the pros and the cons and determine whether or not you are borrowing an amount that you can actually repay in the future.
Know The Details Of Your Loan
When you are taking a loan, make sure you fully understand all the details regarding it. Know who to contact when you have any questions. Find out who the servicer is and when your repayment will begin. It is also better if you understand the repayment options you have.
Do not be scared to take out a loan for your studies. The benefits you’ll get would outweigh the downsides only if you understand what you are getting into. Do not hastily make the decision. Ask for help and guidance from the right people. This would save you a lot of headaches and stress in the future.
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