You may have heard the news about the student loan crisis. This may be causing you some concern over how you are going to finance going back to school. However, what you need to realize is that if you are smart about borrowing money, you can avoid problems when it comes time to pay your student loans back.
Consider these three tips that can help you borrow smart:
#1 Try to Borrow as Little as Possible
Before applying for student loans, you want to make sure that you borrow as little as possible. Your first step is to fill out the FAFSA to see if you are eligible for financial aid, such as the Pell Grant. Any money that you receive as a grant or scholarship is basically free money. You don’t need to pay it back as you would with a loan. Every bit helps in reducing the amount of money you may need to borrow to pay for school.
#2 Apply for Federal Loans First
When you fill out the FAFSA, you will also find out what federal student loans you are eligible for. The advantage of having federal loans over private student loans are that the interest is lower and fixed throughout the life of the loan. Rates with student loans can increase while you are still paying off the loan. While you are in school, the government will pay the interest on subsidized loans and you won’t have to start paying back your loans until after you finish school. Federal loans also offer income-based repayment plans that make it easier to repay your loans. You do not have that option with a private student loan.
#3 Only Borrow What You Need
One of the biggest mistakes student borrowers make is borrowing too much money. When deciding how much to borrow, you need to understand how much your salary will be after graduating. Try not to borrow more than what your expected first-year salary will realistically be to avoid overextending your finances after graduation.