Tips for Federal Family Education Loan Borrowers
Signing a promissory note for a student loan may be your first experience of taking on a major debt. Investing in your future can pay off, but plan carefully to avoid investing in the wrong course of study and getting too deeply in debt. You must repay your loan. Making your monthly payments on time establishes you as a good credit risk for other loans. Here are some tips to help you borrow wisely.
- Find out from the school's financial aid office what other aid you can receive—grants, scholarships, and work-study—before applying for a loan.
- Ask the school financial aid office to explain your budget. Make sure you understand the total cost of attending school, including estimated living expenses.
- Schools have rules on making refunds to students who withdraw. Know the details of the school's refund policy before you enroll. Schools are required to provide you with this and other consumer information.
- Check into job opportunities in the occupation you've chosen before you enroll. Some people default on student loans because the schooling they received didn't lead to the job or pay they expected. Disappointment is understandable, but you still have to repay the loan.
- Borrow only what you need. For a quick estimate of how much you will pay based on how much you have borrowed, the interest rate and the repayment period, use the Loan Payment Calculator.
- Students receiving their first Stafford Loan must go through entrance counseling. The school you attend will give you information about this process.
- Consider getting all of your loans through one lender to minimize the chances of having to make payments to two or more lenders.
- Use student loans only for your education. Giving false information, forging information or using loans for any purpose other than school expenses is against the law.
- When you begin repaying your loan, keep your payments up to date. If you have trouble with payments, contact your lender immediately.
- Consider paying a few more dollars each month to reduce the interest you'll pay over the life of the loan. The extra money is applied to the principal, which lowers the amount of interest you'll have to pay.
- If you have any trouble making your payments, contact your lender immediately. You may be able to get a deferment or forbearance. Before you enter repayment, you will go through exit counseling, which will explain what kinds of deferments and forbearances are available.
- Contact your lender or KHEAA about consolidating your student loan accounts. A Consolidation Loan can cut your monthly payments nearly in half, although you may end up paying more interest.
You've probably seen television commercials for student loans. Keep in mind that these are NOT federally guaranteed loans. They're private loans, sometimes called alternative loans. The interest rate is based on your credit rating, and the loan may require a co-signer, especially if you're considered a dependent student. The interest rate will be higher than you will pay on Federal Stafford and PLUS loans. You will probably not have the same deferment options you have with federal loans, meaning you will have to start repaying the private loan while you are in school.
If your grant, scholarship, work-study and personal funds aren't enough to cover your college costs, you should first get a Stafford or PLUS loan. If you still need more funds and a private loan is your best alternative, you should compare lenders to see which one offers you the best interest rate and the best repayment options, including letting you defer payment until after you finish college. Private loans should be your last resort when it comes to paying for college.
