Even with higher education being much more accessible than it once was, thanks to myriad universities, colleges, community colleges, trade schools, and online programs, it can still be expensive to attend. However, many students find that they’re eligible for scholarships, grants, and both federal and private student loans to help them cover costs.
The hope, of course, is that a college degree leads to a lucrative career, allowing graduates to quickly pay off their student loan debt. As a student, choosing a major that leads to a bright future is important.
When it comes to taking on student loans, though, you may be prone to several common blunders, and most of them are avoidable if you’re simply aware. Here are just a few of the most common mistakes students make where loans are concerned and how you can steer clear.
Missing deadlines
Applying for student loans generally starts with FAFSA, the Free Application for Federal Student Aid. If you are eligible for federal grants and student loans, based on financial need, you will receive aid through FAFSA. Many schools and agencies also use information provided by FAFSA when determining who will be awarded scholarship funds, so it is imperative that students seeking financial aid file with FAFSA.
However, you must meet deadlines for filing. Missing a deadline could leave you enrolled in classes with no way to pay for them when tuition is due. Of course, you can also apply for private loans, but these often come with higher interest rates and less favorable terms for repayment, so it’s preferable to take out federal loans whenever possible.
Failure to read the fine print
Understanding the terms of any contract before you sign is wise, and when you take student loans, you’re entering into a contract. Over the course of your college career, you may end up taking out several different loans, and you’re responsible for meeting the terms to repay all of them. There are helpful companies like AmeriTech Financial who can consolidate and lower those payments despite you missing the fine print earlier in your college career.
Mainly you need to understand repayment options, including interest rates (as well as how and when interest accrues), and the form of repayment. In some cases, you’ll find yourself on a 10-year repayment plan once you graduate. However, you may want to consider income-driven repayment plans that limit monthly payments to 10-15% of your discretionary income.
Ignoring forgiveness programs
There are several pathways to partial or full loan forgiveness once you’ve earned your degree. For example, certain types of loans have partial forgiveness rules built in that alleviate debt if you pay a certain percentage over a certain amount of time.
You may also be eligible for some measure of loan forgiveness if you serve in the military. In addition, some companies offer education reimbursement programs, providing a set amount of money to help employees pay down college debt as part of their benefits package. However, you have to do some research to find such forgiveness programs.
Paying the minimum
When you first graduate, you may not find a job right away, or at least not a high-paying job that allows you to pay off student loans quickly. However, you should always try to pay more than the minimum monthly on your loans if you can, and avoid deferring since interest continues to accrue. This helps you to reduce interest payments and get out from under the burden of debt.