Getting that university acceptance letter is only half of the battle when it comes to tertiary education – you also need to find a way to pay for it and tertiary education is not cheap. But is it worthwhile taking on significant debt to earn an academic degree? The answer is a resounding yes. There are, however, a few things students and parents need to carefully consider before making any university-related financial decisions.
Know What Type of Loan You are Applying For
Loans come with different terms and conditions, but a student loan will come in one of the two forms; Federal (funded by the government) or Private (from banks and credit lenders). In many cases, some students can qualify for more than one type of loan. It is therefore vital to know the difference between the two and which one best suits your financial needs.
Federal Student loans come with incentives like fixed interest rates and the ability to restructure payments based on income. Private student loans have slightly higher interest rates and fewer incentives however with a little in-depth research you may be able to find a private loan with lower interest rates. It is better to first try and maximize your federal student loan options before getting your finances tangled. Being aware of which type of student debt you are eligible for will streamline your application process.
Know Where you Stand and Know the Terms
Knowing all the ins and outs of your financial standing just as your financial advisor or creditor would is vital to your financial stability. Knowing all the ins and outs of your financial standing just as your financial advisor or creditor would is vital to your financial stability. Like all debt, your credit score can affect the size and type of loan you can receive – and a student loan is no different. It is important to educate yourself on your credit score, your financial position and the options available to you as to not miss any benefits or hidden policies that can affect you. Make sure that any and all errors are reported and corrected before contacting your financial aid officer.
Another thing to consider when it comes to understanding and repaying your student loans is the difference between ‘short-term’ and ‘long-term’. Short means less and long means more. The shorter time it takes you to repay off your debt the more you will pay per month, but the less interest you will pay over the life of your loan. However, if you choose to make smaller payments towards your debt over a long period of time you may end up paying a significantly larger amount of interest over the years.
Your grace period is a set period you can wait before you must make your first payment. But, not all loans come with a grace period. Grace periods can be helpful as it allows you time to get a job and save some money before having to make your first repayment. However, if you choose to forgo your grace period you can offset some of your accruing interest.
– Considering Deferment and Forbearance
Deferment and forbearance of student loans allow the payer under certain circumstances to temporarily stop making your loan payments or reduce your monthly payments for a fixed period. Check to see if you or your loan qualify for one or more of these payment options as stopping or reducing your payments could possibly help you manage your debt and avoid default.
Payless For Your Loan
Paying less for your loan each month can help you manage your finances and repayments better. There are two options for reducing your student loan monthly repayments: Debt Consolidation and Refinancing. Debt Consolidation is the financial act of combining all your loans into one payment with lower interest rates. While this simplifies your payment process it doesn’t really reduce your loans burden. Refinancing requires you taking out one new loan, with lower interest rates can help you pay off your debt faster. It is vital to do research on which option is best for you and your financial plan before implementing either of these financing options.
Is Your Loan Worthwhile?
This is a hard question to ask yourself, but it is one worth considering. Knowing your probable earning potential for after you graduate and what your projected salary will be after receiving your degree will help suggest whether taking out a student loan is worthwhile for you and your finances or not. This is a hard question to ask yourself, but it is one worth considering as it could potentially save you a lot of financial issue in the future. Depending on your desired degree you might not be able to find a steady job straight away or a job that pays enough for you to meet the minimum monthly repayments.