With the ever-increasing cost of college education, student loans are a common way to fund your way through your academic life. As your first encounter with credit, you may be eager to sign the documents, thinking you'll land a job right after graduation and generate enough income to pay off your debt as well as sustain yourself. The reality is often different, as this article discusses after outlining the basics of applying for a student loan.
Check Your Financial Situation
Once you've chosen your school and determined the semester fee, assess whether you have enough funds to pay for your education. Some common sources of income for youngsters are:
- Previous savings from internships and small-time jobs.
- Parents or educations willing to support your education.
- Scholarships you were awarded.
- Part time jobs you plan to get while still in college.
If you have enough saved to fund your boarding and tuition fee, thank you stars, pat yourself on the back and stop reading this article. If you face a shortfall, keep reading.
Look for Additional Funds For College
You need more money and your first choice should be to look for education grants because you do not need to pay them back. If that fails, search for interest free loans (read definition of interest-free loans) because even though you engage in a debt obligation, you're saved from the additional burden of paying back interest. There aren't many providers of such loans, so you have to do a fair bit of hunting.
Your last options should be to go for interest-based student loans because even though the interest rate is lower than that charged on consumer loans, they are difficult to pay since your future income is uncertain.
The US government offers a couple of student loans programs, which charge lower interest rates compared to such loans offered by banks and credit card companies. Here are a few features:
- Loans for students and parents sending their kids to college.
- Some loans are subsidized in the sense that the government partially pays your interest fee while you are studying.
- Qualifying for these loans means you must hold a good academic record.
- The amount of loan you receive depends on your current financial position and your tuition fee.
- You usually have to pay back the money after you leave college, even if you are still looking for a job or failed to complete your degree.
- Make sure you thoroughly compare each student financing deal before signing the contract and avail every opportunity of financial counseling available to you.
The bitter reality of student loans (some risks to be aware of)
With unemployment rates so high, it is possible that you will struggle to pay off your loan. By the time you graduate, you will probably owe a truckload of debt (thanks to the way compound interest works) and many students may feel over-whelmed.
Any installments missed for whatever reason, will negatively affect your credit score, and may I add that your credit score will follow you around like a shadow throughout your life. You will receive constant reminders from your lending agency to repay the sum, and sometimes students can be taken to court to recover the debt.
In some cases, your debt may be forgiven (if you are bankrupt, offer community service, developed a disability, or if your school shuts down, to name a few) but it is wise not to rely on this happening before you start college.
Many students manage to get through college without borrowing a cent, and while that is a huge struggle, it is one that is worth the effort. Once you graduate, all you need to worry about is getting a decent job.