by Thomas Kokis
December 12, 2018
December is a busy time of the year, not just for people celebrating the holidays, but for anyone looking to attend college in the fall of the following year. During December, college applications are submitted and students have to make one of the most important choices about their futures. Often this decision can’t be made without asking “How am I going to pay for college?”
For most families, a college education is not possible without student loans. A variety of student loans exist and it’s important to understand their differences and details. Being informed can help you avoid costly mistakes that can affect your financial future.
For starters, when you take out a federal student loan, you are required to repay the loan, including fees and interest, when you complete your program or stop attending school at least half-time. Student loan payments are typically deferred as long as you are attending college at least half-time. After you leave school, federal student loans offer a 6 month grace period before you’re required to begin repayment. Be sure to check enrollment requirements as dropping below half-time could mean that your repayment period starts earlier than you expected.
Here are some tips to review before securing a student loan:
- Know the difference between subsidized and unsubsidized loans.
Payment of both loan types is deferred while you attend school at least half-time. The government pays the interest on your subsidized loan while you are in school, but the interest on the unsubsidized loan is your responsibility. Making payments on the accruing interest on an unsubsidized loan can save money on interest. If you can, make payments while you’re attending school.
- Look for outside scholarships to help pay for college.
Private donors and many organizations offer millions of dollars in scholarships each year. Investigating your options early may mean less borrowing for college.
- Know how much you’re borrowing—and how much you owe.
It’s important to monitor how much you borrow. Keep in mind the length of your program of study and other expenses you may incur while studying. Maximum loan amounts may apply. You can monitor your borrowing by going towww.nslds.ed.govor looking up the information on your loan servicer’s website.
- Know your loan servicer.
If you take a student loan, you will be assigned a loan servicer. Your loan servicer is the company that will be collecting your monthly payments once your repayment period begins. If you do not know the name of your servicer, you can look up that information by going towww.nslds.ed.gov. You will need your FSA user ID and password, social security number and date of birth.
- Make payments while in school. (Even small payments.)
Making small payments while you’re still in school will help you pay down your loans, which will save you money in the long run.
- If you move, change your email or phone, notify your loan servicer.
Make sure this information is always current so you do not miss key communications. It only takes a quick phone call to your servicer.
- Set up an online account.
An online account with your loan servicer is a good way to track your loan balances, payments, and other activity, as well as an easy way to update your account information.
Creating a monthly budget is a great idea to help you monitor and control your spending—before, during, and after your years in college. Changing your spending habits early can translate into less borrowing for college and make repaying student loans easier.
- Sign up for your school’s web service tools
Many schools offer on line web content related to financial literacy. Ask your college’s Financial Aid Office if they have those types of tools available and what you need to do to access the information.
- Stay informed.
If you are in repayment, and find yourself falling past due, contact your loan servicer immediately to talk about options to bring your account current. The longer you stay past due, the more damage is done to your credit.
Thomas Kokis is the Director of Student Financial Literacy at Berkeley College
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