Student loans. No two words can cause so much dread and anger. However, for many students, it is one of the only viable options to fund a higher education. If there is one thing students really don’t need hanging over their heads, it’s the thought of how they are going to pay off their loans. Thankfully, there are steps to help make facing these loans easier.
Know What You’re Getting Into
There are quite a few different kinds of loans out there. These loans include:
- Subsidized Stafford loans: guaranteed loans made by the government for students in need of financial help
- Unsubsidized Stafford loans: guaranteed loans made by the government not based on financial help.
- Perkins loans: low interest federal loans that are given to students with exceptional financial needs by the college or university
- Institutional loans: loan provided by the college or university, the terms of loan (payment schedule, interest rate, etc.) is determined by the college or university.
- Private loans: a loan provided by a private institution, most likely a bank. The terms of loan is determined by the institution.
The American Student Association has some great information on these loans and other loan types. Make sure to look into all loan options available and what monthly payments would look like. Filling out a FASFA form will may provide some more federal aid options. Consider looking into scholarships to help ease the burden.
Planning For the Future
Like it or not, these loans need to be paid back at some point. Planning how to pay them back is essential to helping ease some of the pressure. This means asking yourself and others some important questions. Are you going to go straight into the job market? What does the job market look like for your field? Answering them, or having some idea of what the answers are will help you to better plan for the future.
Getting some information about what kind of jobs there are after college and how much they pay can help to create a budget. A budget is critical to paying off the loan(s). Figure out how much you need to pay each month for your necessities, rent, food, utilities, and your loan repayment. Having a cost estimate can help you avoid unnecessary spending. Also, make sure to save, put aside some money in the off chance you really need it to use on the loan payment.
There are things that can be done during college, such as working a part time job or a couple of jobs. Sacrificing some time and fun can help to build some money up to pay off some of the loan. Unfortunately, the balancing act of going to college full time and having a part time job isn’t for everyone. It can add to the pressure of doing well in classes and detract from the amount of time you have to do school work.
Prepare for Worst Case Scenarios
Out of college, no job, and the repayment letters start coming in. It’s every student’s nightmare. The last thing anyone wants to do is default on their student loans. Doing so can kill your credit score, and cause your creditors to garnish your wages>
This is where having some money saved up will come in handy. It can help to ease the transition from college. However, this isn’t a permanent solution. Make sure to get in touch with the loan provider and discuss options that may be available. Some federal loans do have the option of Income-Based Repayment Loan (IBR). The IBR is for people with some financial hardship and can help reduce your monthly income based on your income.
Student loans are a necessary evil. Without them, some students wouldn’t be able to pursue higher education. But it can easily become a nightmare to work with. Being prepared and knowledgeable about all the options is the best way to make the experience manageable.
Photo Credit: Sam Beebe, Ecotrust