It's an accepted fact that college is expensive. Putting up funds for higher education will always be a challenge, but college education is important. More and more employers look for applicants with at least a college degree.
Of course, there are many student aid options, like government grants and scholarships. However, for many people, those won't be able to cover the entire cost of education. Working part-time can help, but a part-time job may also get in the way of academics.
Unfortunately, the current state of the economy has made many people weary of borrowing, for fear of even more debt. In addition, private lenders are tightening up their standards.
But securing student loans is far from impossibility. Here are some tips to consider before signing a college loan:
1) Make sure that you are borrowing only what is absolutely necessary
It's good to ask yourself if you've exhausted all your financial aid options before signing one student loan after another to cover your college cost. Many times, students simply follow the initial financial aid package that the school offers. These offers are usually from preferred lenders.
Sometimes, it pays off to talk to the financial officer to see if you can qualify for more grants, if your financial situation has changed since the time that you submitted your FAFSA.
2) Scout around for federal loans first.
The most affordable and accessible student loans are federal student loans. These offer fixed interest rates regardless of your credit score. The most common federal student loans would be Stafford, Perkins and PLUS (for parents and graduate students).
3) Don't limit yourself to your school's 'preferred list' of lenders.
There are times when a school has a preferred list of lenders. Understand, however, that these offers may not always be the most reasonable option for you. Know the terms and conditions first and compare them to others.
4) Know what to ask before getting a private student loan.
Private student loans can have rates that may change, depending on terms and conditions. Many times, the complete terms and conditions won't be known until you've signed and have been given the fine print.
To avoid unpleasant surprises, you must know what to ask in advance. Here are some of the most important inquiries:
- Ask for the lowest possible interest rate and fee combination available and how you could get that deal.
- Verify if the 'low' interest rate is an introductory rate.
- As much as possible, inquire on how you can get a fixed-rate loan.
- If the offer has a variable rate, ask how high the rates can go, how often the rates are adjusted and how they determine the rate.
- Be sure to know the duration of the loan and ask if there's a prepayment penalty.
- Ask when payment should begin.
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