More often than not, families and students have to take out student loans to pay for college. Before you apply for a student loan, learn about the ABCs of Borrowing Wisely. (Federal student loans are step B and private student loans are step C.)
When getting a student loan, keep a few key points in mind.
-
Borrow as little as possible. See what you can expect to earn in your first years on the job (consult the Occupational Outlook Handbook), and see if your monthly student loan repayment amounts will be manageable. Only borrow what you need for college because taking the maximum will affect your ability to borrow money in the future, such as for a house or car.
-
Understand student loan terms. For example, principal is the loan amount on which you pay interest—the rent for using the money you borrow. Interest can be paid regularly, accrued or capitalized. Accrued interest accumulates alongside the unpaid balance of your loan principal. Capitalized interest is accrued interest that is added to your principal—so you pay interest on the interest.
-
Be careful with multiple student loans. You may borrow from several student loan programs at the same time, but each carries a minimum monthly payment. Investigate combined or extended payment plans to lower your monthly payments.
-
Follow your repayment schedule. The payment amount is a combination of principal and interest due each month. Notify your lender or service provider immediately if your ability to pay is in jeopardy. With job loss or sickness, for example, most lenders will help you make arrangements to handle your monthly payments. When you borrow a federally backed student loan, you must complete entrance counseling to inform you about debt management and default prevention. Defaulting on your student loan can seriously harm your credit rating. It makes you ineligible for more federal financial aid if you go back to school. And your lender, guarantor, or the federal government can take steps to get the money.
|
Borrowing Wisely 
More information