With the class of 2015 graduating with an average of $35,000 of student loan debt per student, it’s arguably more important than ever that students know what they are getting into, and that those with student loans know the who, when, how, and how often when it comes to paying their loan providers. This all begins with a good, solid starter foundation.
1. Find as much “free” money as you can.
Check into scholarships, grants, academic achievement awards, etc. before looking into loans. There are scholarships for anything and everything these days, academic excellence, certain extra-curriculars, being left handed, making prom outfits out of duct tape, even being over or under a certain height. Make sure you check through the school of your choice, and keep checking back each year. I was able to scrounge up an additional several thousand dollars of last minute scholarship funding through my GPA at school! There are also specific scholarships depending on which year of school you are in, freshman, sophomore, junior, or senior, so make sure you keep checking to see if anything new is available to you! See how much funding you can get without borrowing, and then calculate your costs. The more scholarships you can get, the less you will have to borrow and, eventually, pay back. Once you know how much you will still need to get yourself to school, look into student loans.
2. Look into federal loans.
File your FAFSA, and do your research on different loan providers. Different providers will offer different repayment plans, interest rates,and term lengths. Once you’ve made your decision, have someone else double check the terms for you, preferably a parent, guardian, or teacher that you trust to make decisions in your best interest. If you have questions about any of the terminology or financial lingo, ask. Make sure you know what you are signing up for before signing the papers. On that note, make sure you read your paperwork carefully. Some of your loans might have longer grace periods than others, some might not have them at all, which means that you might start paying one loan straight out of school but have a six month window on another. Know exactly how much you are borrowing, and from whom. Keep copies of everything somewhere easily accessible.
Federal loans are usually the most easily accessible option, and it’s relatively simple to renew your funding each year. Just make sure you file your FAFSA on time and know how much you are borrowing.
Some loan providers may also want you to have a cosigner. This is a huge step in taking out loans. While you may not have enough credit, or good enough credit, yet to borrow loans, your parents, relatives and friends might. In that case, you could ask them to cosign the loan with you. Be careful with this, and make sure everyone understands what it means: if you fail to make payments, your cosigner will become responsible to pay your debts. As long as everyone knows what it entails, this can be a great option to open up more possibilities for funding!
Most of the time federal loans won’t cover your entire tuition so you may also have to look at Private Student Loans to cover the gap. These loans are offered by many traditional banks as well as some new lending companies. Do you research and make sure you find one that meets the criteria you are looking for. You can search private student loan options using our LoanFinder.
3. Make sure you know what’s happening with your loans at all times.
Know which loan provider you have, and know if it changes. My loans were through the federal government via FAFSA, but they were sold off to Sallie Mae once I left school. Part way through my repayment, Sallie Mae transitioned them over to Navient, a subsidiary company of theirs. With each change, the repayment address changed and the website that kept me up to date on all of my student loan information changed. Make sure you keep up on changes like this so you always know what’s going on with your loan provider. Know where they are, both the commercial and billing addresses, because many providers have both, one address to send paperwork to and another for sending in payments. Know how to contact them, phone numbers and emails, just in case. Know who owns them, if anyone, and what the terms of your loan will be from the beginning. Know what they can and cannot do with your loans, what you can and cannot do with your repayment, and figure out what your best game plan will be for paying them off.
4. Make your payments on time.
Defaulting is not something to be messed with and can sometimes have serious consequences, including hurting your credit score, a garnishing of wages, or the loss of a tax return to cover missed payments. Some loan providers offer automatic deduction payments, which means once a month they will deduct the amount of your student loan payment from your bank account in exchange for a lower interest rate. This means you never miss a payment, and it actually saves you money in the long run.
5. Pay more than your minimums.
Any extra money you get, put towards your student loans. You’d be amazed how much an extra $10 a month will get you on your student loans. It may not sound like much, but it adds up quickly. $10 a month becomes $120 a year, and at 3% to 7% interest rates, it’s nothing to scoff at. It will help keep your monthly payments from going directly towards paying off the interest, too, and bring your principle balance down faster.
Just these few steps will help you get a good basis of knowledge for paying down your loans efficiently and effectively. Keep yourself informed, and make sure you know your stuff!
About the author
Trinya’s passion for helping others understand student loans started when she began learning all she could to fill in what she didn’t know about her own loans. She enjoys speaking at local schools about the cost of college and assisting friends with their finances. In her free time, Trinya also enjoys reading, writing, and playing music.