Managing Student Loans

  | James Innes

As college expenses continue to soar, students are increasingly reliant on student loans to finance their education. However, like anything else in life, student loans need to be managed. Avoid costly student loan mistakes.

Understand the grace period of your loan, so that you know when have to make the first payment. Read the paperwork and speak to your lender. You need to have this knowledge firmly in your head so you do not miss a payment.

Stay in contact with your lender. Let them know if your number, email or address changes – frequent occurrences during college years. Anytime you receive a phone call, email or paper letter from your lender, act on it immediately. Delays in response can result in smaller or less generous loans.

If you are going for a private loan, from a bank or finance house for example, you should know that they will do background checks on you, including your credit history. You may need a guarantor – often a parent or a family friend. They, in turn, must have good credit and a good credit history. The better your guarantor’s credit score and history, the better the interest rates and terms of your student loans will be.

Pay off student loans in order of interest rates, with the highest interest rate loan paid first. If you can, try and pay more towards your loan than the minimum monthly or quarterly repayment. Most loans do not penalize borrowers who pay early, and it will get you debt-free earlier.

It can be hard to calculate how to get the money for school. A balance of grants, loans and work is usually necessary. If you are working to put yourself through school, do not over commit so that it affects your college performance. Although the prospect of paying back large student loans may be daunting, it is usually better to borrow a little more and work a little less so you can focus on your school work.

Never be afraid to ask about the terms and conditions of student loans and make sure you stick to them. Knowing the pitfalls of student loans is the best way to avoid them.

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