For many college students, loans are the only possible way to pay for tuition and other expenses. If you will be borrowing money to pay for college, some of the following are some student loan mistakes you’ll want to avoid:
Not exploring all of your options
College students will often have a few options when it comes to borrowing money for school expenses. These options can include government student loans, private student loans, and personal loans. Some of these loans will offer better terms than others; this can vary by the individual and the amount that they need to borrow. It’s important that you just don’t quickly accept the first loan you are offered without comparing other options. Instead, opt for the ones that won’t cost you as much in interest.
Additionally, you’ll want to explore the other options available to you aside from loans in general. Many students don’t take the time to apply for financial aid, when they could have qualified to have some (or even all) of their college expenses paid for. There are also a lot of scholarship opportunities available, which can help pay for some or a portion of your college tuition.
Borrowing too much
The amount you’re offered isn’t necessarily the amount you need to borrow; you can borrow less than the full loan amount that is provided. By borrowing the full amount, you may be taking on way more student loan debt than you really need to. Your student loans should cover just what you need for school and possibly some of your living expenses. Borrowing too much can mean taking out student loans for the wrong reasons, and using that cash for things that have nothing to do with school. If you’re being offered more than you’ll need, accepting it can just set you up for financial problems in the future.
Quickly opting for lower repayment plans
If you took out a government student loan and you’re having difficulties affording the payments after graduation, you can usually opt for one of the more flexible repayment options available. Based on income, these alternative repayment plans can make your student loan payments more affordable. It can be an attractive offer—after all, who wouldn’t want to lower their student loan payments? But consider the negative repercussions: by lowering your monthly payments, you are essentially stretching out your student loan. This means you’ll pay more in interest (which can be a lot of money over the course of the entire loan) and will have to worry about that debt for a much longer period of time. Although lowering your payments can be a great option if you truly have no way of making the minimum payments otherwise, these alternative repayment plans should be carefully considered, and only as a last resort.
Not automating your payments
Automating your student loan payments is an easy and convenient way to ensure that you’re always timely with your payments and never miss a deadline. Additionally, some lenders offer a small reduction in interest as an incentive. By not automating your payments, you risk being late, and you miss out on this potential incentive.
Not making payments while you’re in school
Some student loans give borrowers the option to begin making payments while enrolled in school, although these payments might not be required. Instead, required payments typically begin six months after graduation or after a student has dropped to a less-demanding school schedule (be sure to check exact terms with your lender). However, just because you don’t need to begin making payments for a long time doesn’t mean you need to wait until this time, either. If you have the financial means, begin making your payments as soon as you can, even if they’re in very small amounts. If you can get a jumpstart on that student loan debt, you’ll save yourself time and money in the future, and you’ll thank yourself for it.
Are you looking for a way to pay for college, but want to avoid student loans? Or perhaps you already graduated years ago, and you have a significant amount of student loan debt to pay off? Peachtree Financial Solutions is here to help you take care of your college expenses. Whether you have tuition to pay for or debt to eliminate, Peachtree may be able to purchase your future annuity payments and provide you with a lump sum of cash. Contact Peachtree Financial Solutions today to find out how you can sell annuity payments and receive your money sooner.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.