Student Loans: 6 Tips to Smart Borrowing
By Kevin Walker, SimpleTuition.com | For StudentAdvisor.com
student debt has exceeded one trillian dollars and
rising cost of
college has become a crisis. The reality, however, is that student
inevitable for most families who can’t afford college on their own.
borrowing smartly and borrowing less matter now more than ever. Here’s
• Search for other funding opportunities. First and foremost, all students should be applying for scholarships—even if they aren’t freshman anymore. Consider it a part-time job. And also note: scholarships are available year-round, not just before school starts.
• Max-out on federal loans before turning to private student loans. Federal student loans have fixed interest rates that are (usually) lower than the rates on private student loans. But, the biggest advantage with federal student loans is their repayment terms – deferment, forbearance and consolidation options are all more readily available on federal loans than on private student loans.
• Read the fine print before you borrow. According to recent studies, 65 percent of students who take on loans either don’t understand, or are surprised by, the terms and conditions of their own loans. That means they aren’t borrowing responsibly or cheaply. To avoid becoming a part of this statistic, read all necessary information and ask questions of financial aid counselors and lenders before the school year starts and before you borrow.
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• Compare your options. You wouldn’t buy a house or a car if you didn’t know what else was out there, would you? It’s similarly irresponsible to jump on the first student loan you see without comparing the interest rate, the total cost, and how many payments you’ll have to make, in addition to borrower benefits and the terms and conditions.
• Create a realistic budget. To avoid suffocating under the weight of your student loans, carefully and realistically make a budget, aiming to cut down on extraneous spending. For example, instead of spending cash off-campus, take advantage of an on-campus meal plan. Another tip: brew coffee instead of buying it at a café. Lifestyle changes aren’t always necessary, but wise spending is.
Manage your debt and make payback a family effort. You can’t manage your debt if you don’t know who you owe, how much debt you have, or how fast interest is accruing. That means organize everything: your college costs, scholarships and grants, loans, and other contributions. Figure out a payback plan. Are your parents going to help out? If so, how much will they help? SimpleTuition’s College Cost Adjuster can help you plan. If you haven’t picked a college yet, the Cost Adjuster can help you compare schools by the price you’ll actually pay, even taking into account your own financial aid package. If you’ve already chosen a school, it can help you balance the costs between student and parent contributions. The best part? It’s totally free.
Kevin Walker, Co-Founder & Chief Executive Officer, SimpleTuition
Kevin Walker is the Co-Founder and Chief Executive Officer of SimpleTuition, an online service designed to help you find your way to your ideal college loan. Consumer-friendly technology has revolutionized mortgage and car loan shopping. SimpeTuition has applied the same thinking to bring you an objective, online comparison website that will make your borrowing choices clearer. Kevin serves on the Board of Trustees of the Tower School and was a 2009 Finalist from New England for the Ernst & Young Entrepreneur of the Year Award. He holds a BA in Russian from Amherst College and an MBA from Harvard University.