Top 6 Things to Know Before Taking Out a Student Loan

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Landing that college acceptance letter is only half the battle when it comes to attending higher education — you still need to find a way to pay for it.

“Higher education has so many challenges, and private higher education has a special challenge of ever-rising tuition costs” – Ken Starr

There is no denying the fact that the only ticket to success for anyone is with a strong base of education. At some point of time or the other, we must have heard our parents and elders say “study well and prepare so that you can live a comfortable life later”. Having said this, it is also true that the entire system of education has changed drastically in the last few years. Earlier the education sector was the most pious and noble sectors, but today it has become a business.

It is true that with the prices of almost everything shooting sky high, the prices and cost of a good and decent education were also meant to rise. As simple roofed constructions turned to fancy architectural buildings, and the walks to school were changed to air-conditioned buses, somewhere the price invariably increased. But, one thing the education sector probably did not think about was whether all the people will be equipped and financially stable to manage and pay these incessantly increasing academic costs?

It is true that an educational loan to fuel your dream of getting into that Ivy League college will definitely help any student kick start his career. However, there is no denying that the cost of higher education has gone from high to the highest within a short time span. In some cases, parents start saving every penny just so that they can provide the basic necessity to their child which is that of a good college education.

There are some who are able to achieve this feat and for those who are unable to, there is the option of applying for a Stafford loan or private student loan. The biggest mistake that they make is that they don’t calculate that taking an educational loan results in people paying up for it for the next 5 to 6 years. In fact, some students who graduate from college still pay for the installments to pay back the loan amount that they borrowed from the bank.  

What to know about student loans

With something like 40 million Americans juggling student loan debt, it’s no surprise that paying for school with a loan is a popular way to handle those costs. Before getting too far down the rabbit hole, here are six things to keep in mind:

1. Are student loans the only way?

Before a parent or a student signs below that dotted line on the terms and conditions of a loan application, first, ask yourself whether applying for a student loan is the only way. People assume that the only way through which any student can be put through formal high school education is by taking the excessive burden of a student loan. But, if you look better and analyze your options, there are many other alternatives. If a student is sharp and has performed well you can apply for a scholarship or some sort of grant. These days a number of universities come up with grants and scholarships to attract more eligible students to them. All you need to do is search extensively and keep your eyes and ears open for the correct opportunity.

2. Will you be able to pay the student loan debt back?

If you are a student of 18 years and above and you plan to take a student loan in your name, you will be the signee and the amount that will have to be paid back will also be your responsibility. There is a lot at stake here and paying back a huge amount is not as simple as signing that student loan agreement. So, be very careful and see if your finances allow you to pay the bank back.

3. Is taking out a student loan even worth it?

Some may ask why this is important while taking a student loan. As discussed in the point above if you as a student are taking a loan on your name you are the one who is liable to pay it. If part of your repayment plan includes your prediction of getting a job and then paying back the amount, then you very well be prepared and on the lookout for it. The better the job you get, the better will be your package and this will mean a better ability of you to pay back the amount loaned to you.

4. Are you sure you understand the student loan repayment terms?

If you see any banking document at the time of taking a loan right at the bottom many things are written in rather smaller texts. Such small texts that they often go unnoticed. These small texted sentences are actually the most important because they cite all the conditions applied and levied on you. Before you take a loan make sure you understand all the pros and cons and also understand what the penalty charges will on account of non-payment. It is your right to find out the rate of interest and the repayment schedule so that you don’t encounter any surprises later. Be cautious rather than be sorry.       

5. Do you have any other debt?

If you or anyone in your family already has another loan taken, then you might want to reconsider the option of taking yet another loan and an added financial burden. Considering if the loan amount is small then probably there is no need to worry, however, if the amount is noticeably big, then the advice would be to think of other options but stay away from another student loan. People often don’t realize that in the event of non-payment their credit score will get ruined and this will affect their future loan aspects.

6. Will you keep tabs on the repayment terms?

Even once you take a student loan it is very important to keep a tab on the repayment cycle and keep a regular check on how much you have already paid, and how much of the amount is still left. If you plan things right from day one there will be no reasons why you may encounter a problem like non – payment.

It is understandable that in order to reach your dreams people often seek help. And, as a student, if you have to settle for applying for a student’s loan, take all the necessary precautions and play it safe. Speak to some advisors (could be your parents or someone known from the banking sector) and only then go ahead once you figured out what to know about student loans in full.

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