5 Student Loan Mistakes to Avoid
Some student loan mistakes are made when applying for and taking out the loans and others are made during repayment. We want to tackle both types of mistakes to help you avoid them.
Here are our student loan mistakes to avoid:
Not knowing how much you need
Almost all schools require students to fill out the FAFSA for federal financial aid. Your FAFSA results will tell you what your estimated family contribution (EFC) will be for your cost of attendance (COA). That number should let you know how much you’ll need to borrow. Don’t ignore it and borrow too much, because you risk biting off more than you can chew.
Borrowing all that is offered
It might be easy when you’re a broke college student to see the loan amounts offered as free money, or extra money, toward living daily life. You’ll see it in a new way entirely when you’re getting those bills later and they are more than you can handle. Just remember that you will have to pay this money back, so borrow only what you need.
Not knowing your monthly payments
Make sure you understand ahead of time what kind of monthly payments to expect when you start paying back your loans. You can use online loan calculators to help you plan ahead. Too many students get caught off-guard when that first bill comes. Don’t be one of them!
Assuming you need private loans
Don’t look at your EFC and go straight for private loans. Think about your options. How much of that amount can your family contribute? Are your parents willing to opt-in for the Parent PLUS Loan? Have you discussed school-sponsored scholarships with the financial aid office? Have you applied for private scholarships as well? Many students have more options than they realize.
Not knowing your private loan options
If it so happens that you do need a private loan, please please compare your options. We can’t stress that enough. Visit your local credit unions for great terms and low fees before looking to the big guys. You can also go online and visit student loan comparison sites that show you what different lenders have to offer. This way, you can at least make sure you’re borrowing smart.