Tips When Choosing Your Student Loan

student loan letters on wood

In the United States, there are 45 million borrowers that owe almost $1.6 trillion in student loan debt. That number represents the second-highest category of consumer debt, with only mortgages exceeding it. A recent study titled “National Financial Capability Study” conducted by the Financial Industry Regulatory Authority’s Investor Education Foundation shares some alarming information: almost 50 percent of Americans regret choosing the college they did, wishing that instead, they’d opted for a school that was more affordable.

So, if you are about to head off to school, or your semester has already started and you have realized you need financial help, how can you avoid this same regret? You may not have to choose a different school. The answer may lie in simply knowing a few tips when choosing your student loan.

Understand How Much You Need

You may know how much it will cost for tuition, textbooks, housing, and other expenses that will add up as you attend school. However, this does not necessarily reflect how much you will need in a student loan. Consider what you can use from grants, scholarships, and any financial support your family can provide. Subtract any funding you already have available and deduct it from your total costs. This is how much you will need in student loans, although you may want to apply for an amount slightly higher to cover unforeseen costs.

Submit the Free Application for Federal Student Aid

To receive federal financial aid and review your options, you must fill out the Free Application for Federal Student Aid (FAFSA). You must fill this form out depending on the deadline, which varies by state and year, so determine when that is. If you have recently graduated from high school, or you are still in your senior year, you will have to speak to your parents to obtain some information required for the FAFSA. This includes their income and other general information. The Department of Education also offers loans available to parents.

You will also need to speak to your parents if you are taking out a private loan. Most students do not have enough income or a high enough credit score to take out a loan on their own. As such, your parents will likely need to cosign for yours. Even if you do not think you need a loan right now, still speak to them about it before you go to school in case the need arises in the future.

Understand the Options Available for Loans

After you fill out the FAFSA, you will receive an award letter outlining the federal loan options that are available for you. At this point, you can determine what loans to accept, as well as the amount. The types of federal loans you may be eligible for include direct subsidized and unsubsidized loans, and Direct PLUS loans.

Subsidized loans are an attractive option for students because the federal government will cover the cost of interest while you are in school and during certain periods of deferment, if those are available. Unsubsidized loans do not offer this protection, while direct PLUS loans are only offered to parents and graduate students.

Federal loans provide many more protections and benefits than private loans, so they are always a good starting point when choosing the right loan for you. For example, if you take out a federal student loan and then later work in the public sector, you may be eligible for loan forgiveness under the Public Service Loan Forgiveness program. Federal student loans also offer a number of repayment plans, deferment or forbearance options, and usually have fixed interest rates.

Explore Options for Private Loans

While federal student loans will come with many benefits, you may also have to research the options you have for private loans. This is most often the case in the event that a federal loan will not fully cover your education costs. When doing your research, remember that private loans are often more difficult to secure and a lender will check your credit score before determining if you qualify. If you have a low credit score, or no score as many people graduating from high school do not, you may need to have someone co-sign your loan.

Research the Costs of the Loan, and the Options Available

You may think that choosing the loan that provides you with the most amount of funding is the best one, but that is not always the case. There is a lot that goes into a loan document and to ensure that you are receiving the best one for you, it is crucial that you perform research on the loans.

Regardless of whether you are using a federal or private student loan, you should research and compare:

  • The terms for repayment payment
  • The interest rate, and whether it is variable or fixed
  • The monthly payment you will have to repay
  • The options the loan includes for repayment

Once you know the interest rate and the total amount you will borrow, you should then use an online calculator to determine how much interest you will pay. This will help you determine the overall cost of the loan. When using a federal loan, you are automatically enrolled in a payment plan of 10 years. However, you can change this to something that works better for you.

Understand Post-Loan Life

While you may not have to make any payments while you are in school, particularly if you took out a federal loan, you must remember it is still a loan and you will still have to pay it back. Know when your first payment is due, and remain in contact with your lender or servicer so you do not fall behind on payments.

Call a Florida Debt Defense Lawyer When Lenders Take Action

Student loans are necessary for many people to get a post-secondary education. However, these loans are just like any other, meaning if you do not repay them on time, the lender may take legal action against you. This happens more often than people think and if it has happened to you, our Fort Lauderdale debt defense attorneys can help. At Loan Lawyers, we know how to defend these legal actions to give you the best chance of a positive outcome with your case. Call us today at (954) 807-1361 or contact us online to schedule a free consultation and to learn more about how we can help.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.