College loans seem like a boon for students seeking higher education, but all too often, they can become a burden.
According to the nonprofit group American Student Assistance:
• 56 percent of young adults suffer from near-constant worries about paying back their loans.
• 61 percent are considering additional employment to manage their mounting student debt.
• 54 percent of recent graduates have forgone retirement savings to focus on paying off loans.
To help you make an informed decision about your financial future, consider these tips on taking out student loans.
Student Loan Tip 1: Understand the Offers
While it may be tempting to lunge at the first offer you receive, it pays to shop around for a loan or financial aid package that suits your needs.
The right one isn’t always the largest, so it’s critical to understand the details of a financial aid offer before you sign on the dotted line. For instance, if two schools offer you competing financial aid packages, check their mix of college loan offers, grants and scholarships.
It’s safer to choose an offer that’s primarily comprised of grants and scholarships because you don’t have to pay those back.
How much should you save for college? Try our calculator >>
Student Loan Tip 2: Consider Supplementing Your Funds
Instead of borrowing for most of your expenses, supplement your funds with other sources. Your first step should be filling out the Free Application for Federal Student Aid, and use your essay-writing skills to apply for scholarships.
With a little effort, you could receive funds that are taken directly off of your tuition — and you don’t have to repay them. You could also consider outside employment, a work-study program, an on-campus job or a freelance gig.
According to A.D. James Jr., Director of Student Financial Services at Tuskegee University, working while attending school can help you gain experience and build your resume or portfolio, so you’ll be a step ahead of your peers when you graduate.
Student Loan Tip 3: Know What You’re Signing
It’s easy to accept a loan without understanding what it entails. Robert Farrington, a contributor to The College Investor, remembers how he accepted $20,500 worth of student loans simply by clicking the “Accept” button on his university’s website.
Many students have done the same, unaware of how much their monthly payments will be, what the interest rate is and how long the loans will take to pay off.
Without that understanding, it’s hard to make an informed decision, so always read the fine print and ask plenty of questions before accepting a loan.
Remember, you’ll need to budget for these payments alongside expenses like rent, food and transportation. If you need help getting started, here are five tips to help you create a budget.
Student Loan Tip 4: Use Loans Only for Educational Expenses
When you get your hands on thousands of dollars of student loan money, the rush can be exhilarating.
However, resist the urge to spend that money on fun-but-unnecessary expenses like vacations, entertainment and expensive clothes.
If you indulge too much, you’ll end up owing more money than you can actually pay back. Stick to spending your student loan dollars on the essentials, like textbooks and tuition fees.
Related: Here are a few financial skills to get you off to the best start in college >>
Student Loan Tip 5: Consult With a Financial Expert for Help
When managed properly, student loan money can be a powerful tool to help you reach your educational goals.
Before taking out a loan, be sure to consult with your family as well as experts, such as a counselor, advisor or financial planner. The wealth management advisors at Minster Bank can help you plan for college expenses and retirement savings.
Contact an advisor today to set up your financial future for success.
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Published by Minster Bank
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