Know The Facts About Student Loans
Like many students, you go to college nonchalantly aware that you are spending a considerable sum of money on your education, but not really knowing exactly where the money is coming from or how much of it you are borrowing, or how you would someday pay it back. So, it is fair to say many of us need or choose to borrow money for college without really understanding the long term consequences.
Lenders will give you every penny you need to pay for your education; your undergraduate, grad-school, post-graduate school and beyond. Just because you have, access to the funds does not mean you should take advantage of the opportunity. I know several people from college who took out college student loans for wild spring break vacations or high-tech gear and girls getting student loans to keep up with the fashionista lifestyle, i.e., designer clothes.
It is not that college student loans are bad. Remember two out of five undergraduates need college student loans to get through college, and a sensible amount of debt can be a wise venture in your future. The typical undergraduate will own about $17,000 in college student loans after graduation.
Keep in mind, once you take out a college student loan, the debt can follow you forever and generally cannot be expunged in bankruptcy court; lenders are sticklers about being paid and are ready to screw your credit history without remorse. The problem is lenders will lend you far more money than you can painlessly repay.
The general rule for borrowing money is that you should not borrow more money for your entire education than you predict to make your first year out of college. This amount obviously varies based on your degree, e.g., is your degree in Computer Science, Engineering or Literature.
There are two basic types of college student loans: federal government provided or sponsored student loans and private student loans. Some of the most popular kinds of college student loans are Perkins, Stafford, Heal and PLUS loans, but do not worry (Parent Loans for Undergraduate Students) are your parents responsibility.
Federal college student loans have better rates than private student loans and are more lenient - offering a variety of repayment plans and even the chance to have some of your debt erased if your income is low. Private student loans have higher interest rates that start around 8% and can go as high as 19%, in most cases they cannot be erased or forgiven.
There are two kinds of federal college student loans:
In a subsidized college student loan, the government will pay the interest while you are in school.
With an unsubsidized college student loan, interest starts to occur as soon as you get the loan (although payment may not be due until graduation).
Perkins College Student Loans: These are subsidized loans awarded to students with “exceptional financial need” and come with a fixed 5% interest rate. You are allowed to borrow up to 20k for undergraduate work and another 20k for graduate school.
So, when you are going for the college student loan. Know what best benefits your particular financial situation and needs. Do not go overboard. Keep it simple to handle for after you graduate.
