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A Guide to the Complex World of Student Loans

understanding student loans

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  • Student loans are a great way to help pay for college, but some loans offer better deals than others.

    Make sure you understand the conditions of a loan before you borrow.


    Know How Much You Need

    Student loans are intended to help you with the expenses of college. This includes tuition, books, supplies, transportation, and living expenses.
    Loans are usually paid on a semester-by-semester basis. Consider the price of a semester at your institution and the amount you’ll need to pay for books and supplies; this information is usually available on your school’s website.

    Next, calculate your living expenses for that semester. Unless you have plans for the summer, budget a little extra for months when school is not in session. Consider working a part-time job or finding other ways to minimize your expenses; you want to spend as little of your loans as possible.

    All loans accrue interest after you take them out. Borrow what you need for school, but try not to borrow extra. You’ll have to pay it all back one day.

    Explore Federal Funding Options

    College students have access to both state and federal assistance to help them go back to school. Apply for financial aid before you take out any other loans. If you go to community college, your federal grants might actually cover most of your tuition.

    Once your application is approved, see if you have been offered any direct loans. Subsidized loans do not accrue interest while you are in school; unsubsidized loans do accrue interest, but they do so at a reduced rate. Compare these interest rates to outside lenders and make sure that you’re getting a good deal.

    Consider Private Lenders

    A private lender can help you finance your education. Your options include banks, credit unions, and lending groups, such as Liberty Lending Group. Private loans are often used to supplement federal financial aid; they can help you cover your living expenses or pay for more expensive institutions.

    Private loans work differently than federal loans. You might need your parents or a reference to co-sign the loan, and there will be different restrictions on the amounts you can borrow. Compare each of your loan offers and find a lending group with a good interest rate.

    Understand Your Interest Rates and Repayment Conditions

    When you take out a student loan, you are borrowing from your future self. You will need to repay that money once you graduate. You are promising to seek employment with your degree, and you are expecting to get a better salary than you would without that education.

    Carefully review the conditions of each of your loans. Use a calculator to determine how much interest will be added while you’re in school. Think about how that interest will multiply over the life of your loan; you may want to make larger payments to reduce interest.

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    Read the repayment conditions for your loan. Some loans expect repayment as soon as you graduate, but others offer you a short grace period in which to find a job. Find out if you have a minimum monthly payment or if you’ll need to pay a percentage.

    Once you know what your post-graduation monthly payments will be, compare this to your degree’s expected salary. Decide if you will be comfortable making that payment before you borrow the amount.

    Most loan offers are very straightforward. As long as you find and read the conditions of the loan, you can make intelligent decisions to finance your education.

    Image Credit: Pixabay

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    Off-to-College reference:

    GUIDE: all about college financing

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