How to Make Informed Student Loan Decisions
July 6, 2023
If you are thinking about taking out student loans, you may have some questions:
- Am I eligible?
- How much money should I borrow?
- When do I have to pay it back?
Many students have a hard time making a decision about applying for student loans to pay for college. It is a decision that should not be taken lightly. Take time to research the options.
1- Compare eligibility requirements.
Federal Student Loans
Some federal student loans consider a student's:
- Financial need
- Enrollment in an eligible training program
- Good grades
- Completion of the Free Application for Federal Student Aid (FAFSA)
Private Loans
- Are often credit based
- May require a co-signer or some form of collateral with no outstanding debts
2 - Consider how much to borrow.
This is a question that only a student and their family can answer. Here are a few questions to ask yourself:
- Are there other options for paying for college such as scholarships, grants, or work-study?
- What amount is not covered by other sources?
- Is there a need for more money to cover my out-of-pocket expenses?
- What career will I pursue? How much does that career pay?
- Will I be able to work and make payments on my loans while I am in school? Will I have to wait until I graduate to start making payments?
- How many years will I need to take out students loans? How long will it take me to repay the loans?
- Am I responsible enough to make payments on time until all of the debt is paid off?
3 - Consider how long it will take to pay off the loan.
One important fact to remember when borrowing: loans must be repaid with interest. Some students are afraid of ruining their credit by taking out student loans. Taking out a student loan will not hurt your credit UNLESS you do not repay the loans. Repayment options vary from loan to loan.
Key points to remember:
- Talk to your lender to find out the details of your repayment period and amounts.
- Know if you have a grace period. This means there is a certain amount of time where you are not required to make payments. Common grace periods are 6 to 9 months after graduation. Usually, this means that a student does not have to make loan payments while in school and for several months after graduation.
- The standard repayment period is up to 10 years. Some lenders offer programs with 25-year repayment periods.
Other student loan resources:
