Everything You Need to Know about Student Loans
January 30, 2018 |
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If you didn’t receive a scholarship for your education, or it isn’t enough to cover all your costs, a student loan might seem like a gift — but a gift with some very important strings attached. Student loans are quickly becoming the most prevalent type of debt in the United States. Almost all students graduating from college will come out with some level of student loan debt.
But if you take the time to learn a little more about student loans, you can more easily manage the costs that come with education. Here are some of the best tips we’ve found for managing student loan debt.
Types of Student Loans
First things first: fill out the FAFSA or the Free Application for Federal Student Aid. It’s the best place to start for receiving federal funds for your education. Along with loans, the FAFSA will determine your eligibility for grants—which is basically free money—and work-study programs, which allow you to work, generally on-campus, while you study to help offset costs.
Generally speaking, there are two types of student loans: federal and private. If possible, look into federal loans first. They tend to have somewhat lower interest rates, which could prove helpful when you or your student graduates and begins working. Federal loans are also provided by the government and have a fixed interest rate, so you won’t have to worry about rate increases over the life of your loan. If you receive a federal loan, you may be eligible for special programs after graduation to forgive your loans.
Private loans, or those provided by a financial institution, could have possible interest rate changes and may have limited options for paying down your loan. Pay attention to the details when applying for either type of loan, as there are some that may require you to begin paying before you’ve graduated.
How Much to Take Out
It may be tempting to take out more money than you need for your tuition, books, and room and board so you can have some spending money to use throughout the semester, but this can lead to a slippery slope. Keep in mind that every dollar you take out in a loan will have to be paid back once you graduate — with interest. And while it is great to aim high and think that you’ll be making six figures as soon as you graduate, the reality can be a little less sparkling.
The goal for most students is to have a job in their degree field within six months of graduation, but for many, it takes longer to find this kind of job. You may need to take a lower paying position at the start or something in a slightly different field than you anticipated. With some loans, you may be able to postpone your payments until you find a good job that will allow you to pay down your loan, but this isn’t always the case. Try to keep this in mind before you take out an extra $5,000 to spend on the ultimate spring break.
Paying it all Back
When it comes to paying back your loans, the best advice we’ve seen is to set it and forget it. Set up an auto-payment option with your bank or credit union to have your loan bill deducted from your account every month, then you don’t have to worry about late payment fees. Keeping regular payments like this could also help improve your credit score, which could help with refinancing your loans for better rates and terms. If you find yourself struggling to meet your payments each month, talk to your loan provider about possible relief programs. Not all providers offer some kind of assistance, but it never hurts to ask if you need the help.
Be extremely wary of any company offering “student debt forgiveness” or “relief” or “settlement” that you don’t have any loans with. Make sure you research anyone offering unsolicited assistance with your loans, as most could be scams designed to take even more of your money. There are several websites that look as though they are in conjunction with the Department of Education or similar government agencies, but a little research will reveal that they are scams. If you do receive an offer that is too good to be true, assume that it is and avoid it. Contact your loan provider directly if you receive anything that appears to be from them about your loan before giving out any additional information.
Start Learning Early
Good financial skills can be learned from an early age, so to ensure that your student has the best chance of paying off their student loans quickly and efficiently, teach them the things they need to know right from the start. Start your young student out with a Student Savings Account from DIME to help them learn to manage money before they leave for college. This account is linked to a parent or guardian’s account so you can contribute money and help ensure they pay their bills on time and don’t overspend. And the most convenient part of this account is that it automatically becomes a regular DIME savings account when your student turns 23 or graduates from school. Speak with a member of our team today to learn more about Student Savings Accounts from DIME.
Student loan debt isn’t the end of the world, and with helpful tips like these, it can easily be managed. If you have questions about managing your student loan debt or want to start a college fund for your child, speak with a Dime financial expert today at 1-800-321-DIME (3463).