For most of high school, you’re just worried about passing your classes. But preparing for college can add even more stress — especially when teachers and school counselors don’t educate you about the true cost of college, including student loans.
This could leave you asking a lot of questions about how to pay for a higher education.
If you aren’t getting the guidance you need, you could start off college in the dark about how to afford school and the world of college loans.
6 things you need to know about college loans
College can be expensive, but it doesn’t have to be. Here are a few things you should keep in mind about loans for college.
1. Understand the difference between types of loans
When it comes to financial aid, there are many different kinds available for incoming freshmen, so understanding your loan options is important.
“Start with government subsidized loans,” said Sabrina Manville, co-founder of Edmit, an online resource for researching college costs. “It is usually recommended you exhaust all federal loans before you move to private loans. They generally have lower interest rates and more generous terms, including loan forgiveness or income-based repayment options.”
But pay attention to your college loan offerings, as not all federal loans are subsidized.
Subsidized loans are loans where the federal government covers the cost of interest, while the borrower (or you, the student) is in school. Unsubsidized loans are still federal loans, but you’re responsible for the interest you rack up while in college.
Both types of loans can make a huge difference in your repayments after you graduate. It’s important to know what taking out college loans means for your time in school and after. Here are some things to consider.
2. Know what you have to pay back
Your financial aid letter will show you all the money you are getting for college, regardless of type. This means you’ll see all your grants, scholarships, and loans together. This can confuse families on how much a student is getting in grants and scholarships, and how much they might receive in loans. Be mindful of the difference.
Both scholarships and grants are considered gift aid — or money you don’t pay back. Scholarships are often given based on merit, either in academics or athletics. Grants are generally need-based and usually determined by your parent’s income.
3. Only borrow what you need
When you estimate the full cost of college, make sure you factor in tuition, fees, room and board, and books. The good news is that colleges usually report the estimated cost of attendance on their websites.
Don’t forget to consider other indirect school costs, too, like food, supplies, and toiletries. Manville said there are other expenses like travel costs — whether it’s driving near campus or flying home for the holidays — to consider when budgeting the full amount you’ll need each semester.
Once you’ve done that, you’ll be able to see how much money in loans you’ll need. Sometimes, what you get from grants and scholarships could be enough.
4. College loans will cost you more in the end
The amount of loan money you receive and what you pay back after you graduate aren’t the same. There’s the amount you borrow — the principal amount — and then there’s what you owe, which includes accrued interest.
Student loan interest works in a few different ways, depending on the lender, the type of loan you have, and how much interest has been calculated for you. For example, if you have unsubsidized loans, interest will start adding up when you’re in college, not afterward like subsidized loans.
5. You can (and should) start paying immediately
Manville said it’s also important to remember when your first payment starts (like, say, six months after graduation) and how much those monthly payments are. Follow your loan schedule, which can include how many monthly payments you’ll be expected to make until your loan is paid off. You can always make higher monthly payments if you can swing it.
You could also benefit from starting payments while you’re still in school. There’s nothing stopping you from paying early — only late payments are a problem! Getting a head start could help you begin your student loan repayment on the right foot.
6. Don’t put it out of your mind
It’s easy to forget about your loans while you’re in college, especially since you’ll be busy with going to class. But it’s important to think about your loans while you’re in school. If you’ve got an idea of what your career will be after you graduate, estimate how much you’ll be able to afford in payments based on your potential salary.
“By having a ballpark salary in mind, you can create a potential budget for your post-college life and see how much money you’ll be able to allocate toward your monthly student loan payments,” Manville says. “Armed with your preliminary budget, you can determine whether a particular loan’s terms will work with your long-term financial plan, career goals, and anticipated cost-of-living expenses.”
Putting off paying your loans for college when repayment starts can result in a slew of negative effects on your credit report and send debt collectors your way. Remember that all loans have to be paid back on time to keep your credit score solid.
Be responsible with college loans
The cost of college can be overwhelming, but if you start early enough in your admissions process, you’ll have the right tools to handle college life and college loans. Once you take out student loans, they’re you’re responsibility — even if you don’t graduate.
But while you’re still in high school, take advantage of the help you can get from school administrators, teachers, and parents. Many of them have the knowledge to help get you ready for the next big step in your life.
Take advantage of all the help you can get on how to afford college through scholarships, grants, loans, and any help you get from family and friends. The earlier you start, the more prepared you’ll be.
Need a student loan?Here are our top student loan lenders of 2018!
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