Everything You Need To Know About Taking out Student Loans
Higher education can be an expensive investment. There are many avenues you can take to fund a college education, including student loans. While it can be a complicated process, there are resources available to provide assistance and support when you apply for and review your loans. Here’s what you need to know about taking out student loans.
Compare Different Types of Loans
There are several types of student loans. The main classifications are private and federal. Private loans may be offered by any number of lenders. Banks are common options. You should review and research private lenders and the loans they offer to see which one is right for you. Federal loans are offered by the government and come in four types: direct subsidized, direct unsubsidized, direct PLUS and direct consolidation. While direct subsidized loans are based on the applicant’s financial needs, direct unsubsidized and direct PLUS loans are not.
Fill out a Free Application for Federal Student Aid (FAFSA)
While you don’t need to fill out the FAFSA for private loans, it’s still a good idea to do so to see if you qualify for any federal student aid in addition to your private loans. To fill out the FAFSA, you need to complete an online application with information about your financial situation and how many children in your family are attending college. Then, your Expected Family Contribution (EFC) is calculated and the amount of financial aid the government can provide you is shown. Remember, you need to complete a FAFSA every year that you expect to need financial aid for your education.
Keep Other Sources of Financial Aid in Mind
Other sources of financial aid for education do exist and you may or may not be eligible for them. You may want to consider grants and work-study programs. Some students may also qualify for scholarships based on academic merit or extracurricular activities. There are some advantages to these sources over student loans. Most of these alternatives do not require repayment, for example. However, student loans also have many advantages over these sources. Typically, a student loan provides a much larger source of funding.
Understand How Much You Can And Should Borrow
Remember, student loans need to be repaid after you complete your education. This means you need to know how much you can reasonably borrow. Think about how much you need to fund your education and how much of that amount must come from loans. Try to make sure your future loan payments are equal to or less than 10% of your monthly income. It can be difficult to do this, but you can start by talking to your school’s financial aid office and researching the average salaries of your potential future careers. You may also want to discuss the amount you need to borrow with the lender or your student loan servicer, particularly if you’re taking out additional loans.
Know What Loans Can Be Used For
Student loans cannot be used for any expenses you have. There are strict rules about what you can and cannot use these funds for. In general, a student loan can be used for any expense related to your education. Most borrowers utilize their student loans to pay tuition and other fees related to their schools, such as room and board. However, you can also use your loan to pay for books, school supplies and transportation. In some cases, you may be able to use it for personal supplies, study abroad funding and groceries. You cannot use student loans to pay for such things as entertainment and personal travel.
Different people have different financial needs for their educations. Whether or not you need to take out student loans, what types of loans you need and how soon you begin paying back your loans can all vary. Most resources will provide information and advice for common situations and questions. They should also provide contact information in case you have additional questions or a more unique situation.