Getting admission in the college of your own choice is like a dream come true. However, it is just the first step of your journey. Once you have taken that you won’t be able to take another step until you find a way to pay the fees.
Almost all the applicants believe that they have complete knowledge about the student loan. Yet many of them end up with insurmountable debt. Hence, if you are planning to apply for a student loan, be clear about all the available choices.
The good news is, there are plenty of options available in the market. Hence, you have a good chance of getting your education financed. Just be clear about what you want and where to look.
Things to know before applying for a student loan:
Types of Students loan
A student loan can be classified into two categories:
Federal student loan
These loans are issued by the Department of Education of the United States. In this, you need to fill the FAFSA application. Based on the information filled by you, the Department of Education determines your eligibility in terms of the type of loan as well as the loan amount.
In most cases, a credit check is not mandatory.
Availability of income-based repayment options.
The option of forbearance and deferment is available, in case the borrower can’t pay back the loan.
In case the borrower cannot pay back the loan, then after paying certain instalments, the candidate can apply for loan forgiveness.
Private student loan
As the name suggests, you can get these loans by applying to private lenders like credit unions and banks. These loans charge more interest as compared to Federal loans.
Easier to avail.
Higher loan limits.
You can apply for any of the loans mentioned above. However, it is advisable to make the most of your Federal student loan and then only go for a private loan.
Borrow only what you need — and can reasonably repay
Before you apply for the loan, be clear about the amount you want to borrow. Remember you will need money not only for paying the fees but also other expenses like books, transportation, room, personal expense, etc.
Always be careful while filling the loan amount as you are the only one who has to pay the monthly instalments. For this, you need to have a rough idea of your future earnings. You can work on these details by yourself or by taking professional help.
You can get these services online also. One of the most famous digital-financial aid providing company is Snap Finance. To get more information, just type “what is snap finance” in the search engine. And be ready to explore various financing options to pay for your college fees.
What’s the monthly payment?
Taking a loan is quite easy. The problem starts when the borrower starts paying monthly payments. Hence, the essential thing that you need to ask while filling a loan application is the amount that you need to pay as a monthly payment.
Monthly payment majorly depends on three things:
Duration for which loan is taken.
A longer duration might result in lower monthly payments. Similarly, a lower interest rate is always better than a higher interest rate. Hence, having clarity about the monthly payment is very important. This will further help check whether you would be able to afford the same along with your other expenses like rent, mobile bill, etc.
How much should you borrow?
While applying for a student loan, calculate the actual amount required by you. This includes finding the difference between your full tuition fee and your free income sources like scholarships.
It is advisable to make optimized use of your Federal loans and, if still necessary, apply for a private student loan.
As per financial experts, applicants should not take a loan for the amount exceeding their expected 1st year’s annual salary.
Deferment and forbearance may help in times of need
As a student, you might face situations where you might fail to make your monthly payment. In such situations, deferment and forbearance can be very helpful. Under forbearance, the lender can either reduce the monthly payment amount or can even allow the borrower to not to make payments for a particular period of time. However, the interest keeps on accruing.
Under Deferment, the lender can allow the borrower to stop paying both the interest, as well as the principal amount. Hence, do check whether your loan is eligible for either or both of them. Also check, what all circumstances are considered viable for qualifying Deferment or forbearance.
Get to know your grace period
The time till which the borrower can delay the first loan instalment is known as a grace period. Grace periods turn out to be very helpful in situations where you might have to wait to get a job after completing your education. Different lenders offer different grace periods. So, be sure about your first instalment due date.
It is advisable to make the payments within the stipulated time frame as paying during grace periods may result in interest accumulation.
Find out who your servicer is and when payments begin
In the case of federal loans, a servicer would be provided by the federal government itself. The servicer would help you in managing your loan payments. In the case of a private loan, your lender might act as the servicer or may even appoint another company for such services.
It’s better to know about your servicer during your study days. Clear all your doubts regarding the loan repayment.
Applying for a student loan can be quite a lengthy process. Whether it’s a private or federal loan, both of them have their own ways of processing a loan application.
Starting early with the student loan application process will always be more beneficial. After all, if you have ample time, you can compare all the available loan options. This would further help you in making the right decision regarding the student loan.
Do thorough research and check all the options before finalizing your lender. You might not believe but, a student loan with a lower rate of interest may result in saving thousands of dollars that you might end up paying in interest in case of a loan with a higher interest rate.
Another important thing that you need to check before applying for a student loan is its worthiness. So do your calculations properly and check whether the income you are expecting to earn from your job would be sufficient for making monthly payments along with your other monthly expenses. These are the important things that you should know about student loans.
Focused on providing information for anyone in need of debt relief, Jackson writes a blog on debt settlement, debt consolidation, tax debt relief and student loan debt which helps to find the debt solution that fits their unique needs no matter the amount of debt they are in.