A Few Tricks and Steps to Paying Back Your Loans More Easily
We all need student loans at one time or another, only a lucky few will receive full scholarships or be able to afford school without them. But the steps involved can hide potential downfalls to the unwary student, and understanding the basics at the very least is essential to avoiding default and the destruction of your credit.
The most common student loan you’ll be offered is the subsidized or unsubsidized Stafford loan. Virtually every financial aid office will offer this to it’s students, and it’s one that I’ve used many times in my first few years of college. The difference (and this is crucial) between the two is that a subsidized student loan will have the interest accrued on the loan paid for, by the government, till six months after graduation, or till the student drops below half time status at their institution. This is my personal choice because as long as I’m in school, I can rest assured that when I get out, I’ll have only the loan amount to pay back. If you go with an unsubsidized loan, you will be accruing interest on your loan for the years your in school, even if you don’t have to pay anything back until you graduate. This can be a surprise for students who don’t do their research. Taking out ten grand in loans then finding out you’ve got to pay back on 14 grand after a few years of school is a shocker for anyone. If you go with an unsubsidized loan, make sure that you are paying the interest on the loan as you go, which you are allowed to do, and it will keep your future payments much smaller. Many other loans will fall under these two basic forms, so make sure to ask your lender about your options, understand how the interest will be taken care of, and only take out enough to pay for school. At the end of the day you want as little debt as possible, paying for school out of pocket is more difficult, but far less dangerous to your credit and you’re only spending money you have, not money you’ve been loaned.
The next step, upon graduating, is paying these loans back. Obviously read everything that comes with your first bill very carefully. On one of my loans I was paying 250 a month, but upon closer inspection only 30 dollars of that was going to principal, which means I was basically paying them 220 dollars a month for the privilege of using their lender. I took care of that one by upping the monthly payments to a grand a month, paying them back as soon as possible to minimize the money I lost to interest. Granted this is a more extreme case and you won’t have to worry about it with most loans, but always be informed; this is your credit and future we’re talking about here, and defaulting on a student loan can take you out of the running for a mortgage, future college acceptances, and destroy your credit rating. Having graduated, and hopefully gotten a good job, pay back as much as you can as soon as you can. There’s nothing like living debt free, and paying back your loans will officially conclude your college experience.
I hope this helps you understand how the money you’re given for school will be handled by financial aid and your lenders, and set you up to pay it back as readily as possible. Just remember that this isn’t your money, but it is your debt, and you have a responsibility to take care of it as maturely as possible. Learn how your particular loan is handled by the lender and the government, and do your best to minimize interest and maximize your repayment. If you have a more detailed question about your particular circumstances, your school’s financial aid office or the office of your particular lender should be able to help out with any questions.
Thanks for reading, and good luck in school!