student loan repayment
Education is one of the most significant factors that differentiate those who will move upwards on the economic mobility ladder and those who won’t. Despite the heavy financial burden and the increasing level of difficulty for a college-grad to become financially independent, the necessity of a college degree usually wins out. If we borrow responsibly, budget carefully and repay on time, there should be no reason why we can’t repay our student loans, right?? If only it were that simple. Here are 7 great things to think about BEFORE you take out loans!

1. Private versus Federal

federal loan forgiveness

Today, 93% of all student loans taken out are federal, meaning they are government loans. Pay attention to the difference between the loans you are going to borrow. Federal loans typically offer both lower interest rates and flexible repayment plans. If you are studying to work in public service, a portion of your federal student loans can be forgiven after graduation. Private loans on the other hand are extremely difficult to negotiate in terms of both interest rates and repayment timelines. If you do need to take out private loans, shop around!

2. You don't have to accept the entire amount offered... Borrow only what you need

income based repayment

Private lenders will usually let students borrow as much as they need, regardless if they think you’ll be able to make the repayments post-graduation. This is because private lenders make the most profit on late payments and defaulted student loans. So before you borrow more than you need for tuition, room and board, consider getting a part-time job to cover books, meal plans and extra curricular activities you want to take part in. Carefully evaluate what you need. Actually take a few minutes, sit down and figure out what you need. If the lender is offering you more than that, know that you can accept less than their offered amount.

3. Calculate your post-graduation monthly payments

student loan debt 

By doing this you will be able to realistically understand if you will be able to afford to pay them off. To actually sit down and figure out how much you will be asked to pay each month after graduation towards your student loans can be really shocking. Your repayment plan can really effect your future finances and your ability to make ends meet. Your student loan payments should only be a small amount of your salary. Start researching starting salaries in your field. Being prepared with this information will help prevent massive student loan debt. 

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4. Your co-signer is just as liable for your loans as you are


Did you know that when you take out loans, you are agreeing to repay the loan whether you complete your education or not? Whether you get the job and the salary you were expecting, even if you didn’t like the education you received! There is no way out of repaying your student loans, even if you file for bankruptcy. You will be required to pay the full amount based on your repayment plan, each month, on-time. If you don’t, you’re not the only one who will face consequences. Both you and your co-signer’s credit will suffer when you fail to make payments. Both you and your co-signer will be handed out late fees. Having a co-signer effectively makes them second in line to make your student loan payments if you don’t. That’s a tough thing to ask of anybody.

5. Exhaust every other option first -- Grants, Scholarships, etc.


When it comes to paying for college, grants and scholarships are the best thing you can do. It’s free money that you never have to pay back! There are thousands of grants and scholarships available through universities, the government and private organizations. There are many colleges that will consider you for grants and scholarships just by applying for admission but a quick online search will show you how many actually exist. This is a fantastic way to take the price of your education into your own hands.

6. Most loans accrue interest while you are still in school

defaulted student loans

I definitely did not know about this one. Unless you qualify for a subsidized student loan, which is income based, your loans will start accruing interest immediately. Let me break it down for you. Let’s say you take out a $5,000 loan to help you pay for your 4 years of undergrad. You aren’t paying anything on the loan for 54 months; thats 4 years of school plus the standard 6-month post-graduation grace period. If your loan has a basic 6.8% interest rate, by the time you start to pay that loan back, your loan of $5,000 has now turned into a loan of $6,722.65. That’s an additional $1,722 in interest that accrued while you were still in school. In a basic 10-year repayment plan, your monthly payments just went up to $78/month instead of $57/month. What does this mean? You should make interest payments while you’re still in school. Even if you can only pay part of the interest, you’ll save a fortune in the long run.

7. Don't automatically assume you need them

 public service loan forgiveness

Each year 60% of students borrow to cover their college costs. But that means that 40% don’t. You don’t have to have student loans to get through college. There are ways to get around them. There are plenty of less-expensive state schools and community colleges that offer an education at a fraction of the cost of the private schools. Apply to more than one school and make your decision based on who is willing to offer you the best scholarship. You can work while attending school part-time or at night. If necessary you can even put off school for a year to save some money.  

There’s nothing wrong with taking out student loans to help you pay for college but you have to be knowledgeable about the repayment schedule and make sure you are setting your future self up for success. There is no better time to make these decisions than before you take out any loans. Check out to see what programs we use to help our clients afford the education they deserve and take advantage of student loan forgiveness.

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