Now that you are getting closer to picking the right college for you, how do you pay?
Most students are going to rely on loans to fill any gaps left from grants and scholarships. Below are the best tips for choosing the right student loan for you from application to repayment.
1: Get Low-Interest Direct Loans
Maximize out on the subsidized and unsubsidized Direct Loans first because those tend to have the lowest interest rates. There can be as much as a 3% difference between these loans depending on if you are getting an undergraduate, graduate, or PLUS loan.
2: Find Loans with Fixed Rates
Always seek out the loan that has the lowest FIXED interest rate. You might beat a fixed interest rate with a variable interest rate, but if that rate goes up dramatically, you may pay more interest over the life of the loan.
Variable interest rates will fluctuate over time and the reason they are an attractive option at first is because they offer lower interest rates far below that of fixed rates. But variable rates will often increase beyond what a fixed rate loan offers long term – 10, 15, or 20 years into the future.
Variable rates could be a good option if you are planning on paying off your loans quickly (within a couple years) and can capitalize on the lower interest rates before they potentially increase drastically.
3: Pay Interest While in School
Pay the interest while the student is in school if the loan charges interest during that time. That’s going to save money over the long run-in interest payments.
4: Find Additional Loan Benefits
Always look at the loan benefits and interest rate. Is there a break on the interest rate or principal for getting good grades or using auto debit for payments?
5: Borrow Only What You Need
Borrow only what you need. You can borrow for books or living expenses, but is there a way to cover those costs without taking out additional loans? Consider money-making options such as work-study before deferring to borrowing.
6: Put Extra Money Towards the Principle
Once repayment starts, put extra money towards the principal. Even an extra $25 a month will help to pay off the loan faster.
7: Look for Repayment Programs
Look for special state or federal programs upon repayment. Here is a great resource on loan repayment.
Need Help with Financing College?
Student loans are just one component of making college attainable and affordable.
The Financial Aid King has a ton of other blogs on grants, loans, and scholarships to help you continue planning!
