4 Tips for Taking Out a Student Loan

Going to college is a huge achievement and an exciting time when you can develop the skills you’ll need for the future. It can also be overwhelming to prepare for this new phase of life. From choosing your major to buying everything you’ll need for your dorm, there’s a lot to do before you head off to university. 

Perhaps one of the most overwhelming things about preparing for college is figuring out how you’re going to pay for it. You’ll face a lot of big expenses while attending college, from tuition fees to textbooks. Most college students take out loans to cover their expenses. But before you go take out a loan, you should do some research. There are different types of loans, and each one has its own terms, interest rates, and fees. If you do your research and are smart about borrowing money, you could obtain potentially lower rates and save yourself a lot of money.

What should you consider before taking out a student loan? Here are some tips to keep in mind.

1. Apply for scholarships and grants.

Before taking out a loan, apply for as many scholarships and grants as possible. You can start applying for scholarships while you’re still in high school, so get started as soon as you can. Go to your high school’s career center or counselor to get a list of scholarships and figure out which ones you can apply for. There are also great resources online where you can find free search and application platform tools for scholarships that will fit your needs.

You can also search for scholarships on websites, in your community, and by asking around. You may be surprised by how many scholarships are out there. Apply for every scholarship you can, and keep applying every year you are in college.

Scholarships and grants are basically free money. If you win a scholarship, you can considerably reduce the amount of money you have to borrow for school expenses.

2. Don’t borrow more than you need. 

Calculate how much money you’ll need for tuition and school-related expenses, but don’t borrow more money than you’ll need. You’ll have to pay fees and interest on your student loans, so the more money you borrow, the more you’ll have to pay in interest. Even if you’re offered a larger sum than you’ll need, you don’t have to accept the maximum offer. 

To figure out how much money you’ll need, consider the tuition fees at your college, how much you’ll need for living expenses and school supplies, how much your parents are contributing, and any scholarships or financial aid you may receive. This will help you get a good idea of how much money you need to borrow.

3. Understand the details before agreeing to a loan.

It’s critical that you understand the terms, interest rates, and fees of your loan before you make a final decision. Ask questions if you’re not sure about something. You should know exactly how much you’ll be paying in total for your loan, as well as how much your monthly payments will be. You should also confirm when you will have to start paying your loan. Most loans include a grace period so that you don’t have to make payments while you are in school. But if you don’t know when your first payment date is, you could miss it and get charged extra fees. It’s important to understand all the details of your loan from the beginning.

4. Choose the right repayment plan.

Your repayment plan options will depend on your lender. Some may offer you a 10-year plan, while others may offer you 20 years or more. You can choose from a set monthly payment or a graduated plan where you start out paying less and gradually pay a larger monthly payment. 

There are a lot of options to choose from, and it may be hard to decide. One thing you should keep in mind though is that, while you’ll pay less monthly, a longer repayment plan means you’ll pay more in interest. You should pay as much as you can as quickly as you can to keep your total cost as low as possible. If you have the means to do so, you might consider starting to pay back your loan while you’re still in school. Even if you only pay a little bit each month, you’ll keep your interest costs lower.

College is an exciting experience, and you should enjoy it to the full. But good planning can help you to keep your student loan debt down. Search for scholarships before taking out a loan, as they can drastically reduce how much you need to borrow. Don’t take out a bigger loan than you’ll need or you’ll end up paying more in interest and fees. Understand your loan and how much you’ll be paying in total as well as each month. And choose a repayment plan that will keep your total costs as low as possible. Follow these steps to get the best student loan plan possible.