5 Things To Know Before Taking Out Student Loans

Is taking out a student loan worth it?

It’s not an easy question to ask yourself, but it’s one worth considering… Will the amount of money you’re likely to make at your job be enough to pay off your student loan?

• For example, some lower-paying jobs may not actually end up being worth the price you’ll pay in the end.
• Before you sign on to any loan, do the match to determine how long it will take you to pay back that loan at the average salary you will likely earn from your job, and determine whether or not you’re willing to be in debt for that amount of time.

Paying for college with student loans is a popular way to finance education. Consider these things before signing on the dotted line.

1. Your loans will either be federal or private

In general, student loans come in one of two forms—federal or private.

Federal student loans tend to come with incentives like fixed interest rates and the ability to restructure payments based on income; however, with a little research, you may be able to find a private loan with lower interest rates.

Quick Tip: Do the two-step (no, we’re not talking about the dance). The college two-step mean splitting your studies between two schools. You start by attending a more affordable institution for your general education courses, and then transfer to your school of choice to complete your degree. You will save some money on introductory-level courses and reserve the big bucks for the specialized instruction that comes in the latter half of your academic career.

2. Short equals less, long equals more

When it comes to repaying your loans, the faster you agree to pay off your debt, the more you’ll likely pay per month, but you’ll be spending less in interest over the life of your loan. Conversely, if you decide to make smaller payments toward your debt over a longer period of time, you may end up paying significantly more interest over time.

Quick Tip: Go for extra credit. Find out if there are any opportunities to earn college credits while still in high school. Beyond reducing college tuition costs, advanced college credit programs are an excellent way to explore your interests more seriously and to get a sneak preview of what your college workload will look like. If you’re already out of high school, find out if any colleges or universities in your area offer summer courses at reduced tuition—that could be an alternative way to score some credits before September.

3. Know the grace period

Grace periods—how long you can wait after graduation before your loan payments start—vary, so be sure to find out when your first payment will be due. A grace period can be helpful if you need time to get a job and earn some money before making payments. However, making payments during the grace period can offset some of the interest accruing. Many federal student loans offer a grace period and most private student loans do not. Check with your lender for details.

Quick Tip: Seek out scholarships. Apply for every form of scholarship, grant and tuition waiver that you’re eligible for. It’s never too early to start your scholarship search—reach out to your high school guidance counselor or the financial aid coordinator at the college you wish to attend. Visit scholarship search engines and online resources. Reach out to your current employer and your family members—you never know, there may be some form of tuition subsidy or grant opportunity available to you through an employer or alumni network. Be exhaustive in your search and approach each application with the same level of enthusiasm and optimism—even the smallest awards and prizes will add up. It’s free money, and it’s there for the taking.
Need a starting point for which scholarships to apply for, check out Fox’s scholarship page!

4. Forbearance and deferment may help in times of need

You may need to take breaks in payments from time to time. Forbearance and deferment can help in these situations.

• Forbearance allows you to either stop making loan payments or have them reduced for a certain amount of time(interest will likely still accrue).
• Deferment allows you to stop making payments on both principal and interest for a number of specific reasons. The government may subsidize your interest while in deferment.

Check with your lender to see if these options are available to you, and what the circumstances must be to qualify.

Quick Tip: Location scout. Geography can play a significant role in determining your total education costs. A single school may have different tuition rates for in-state, out-of-state and international students. Generally speaking, staying in-state is usually the most affordable option—in addition to saving on tuition, you can also sidestep some of the larger expenses associated with studying abroad (like travel costs, meal plans and living in residence). Of course, there are plenty of non-financial incentives for studying abroad, but it’s important to understand just how much the location of your school will affect your bottom line.

5. There’s a difference between refinancing and consolidation

Two options to help you get debt-free faster are consolidation and refinancing.

• Consolidation is the act of combining all of your loans into one payment with an
  interest rate that will likely be an average of your existing loans. Consolidation simplifies your payment process, but doesn’t necessarily reduce your debt
  burden.
• Refinancing uses a new loan (hopefully with a lower interest rate) to pay off your existing debts. You’ll then make a single payment per month towards your new loan. The lower interest rate can help you dig out of debt faster.

You’ll need to do a little research to determine which is best for your particular situation.

Quick Tip: Double down. Some schools offer accelerated programs that enable you to complete a four-year degree in just three years. This is a great option to consider—that’s one less year of tuition to pay!—but bear in mind that you’ll be squeezing more classes into a shorter period of time. The intensive schedule might make it difficult to accommodate a job while you’re in school, for example, so weigh your options carefully before committing to a more ambitious schedule.

Brought to you by It’s a Money Thing

Still unsure about College and prepping for it. We invite you to attend one of our seminars on the topic of College and education. We typically hold a few per year. Visit our calendar for any possible upcoming seminars on this topic.