Student loans are a constant source of frustration, worry and regret for most college students – but they don’t need to be. Here’s a list of tips for navigating student loans.
DO:
Fill out the FAFSA
The Free Application for Federal Student Aid is a must when it comes to finding money for college. As it implies in the name, it’s free to fill out. You will lose an hour of an otherwise pleasant evening dealing with government bureaucracy, but it’s worth it. Work study, federal loans and financial assistance from your college are all determined from the FAFSA.
Federal before private
Federal student loans have fixed interest rates, instead of variable, making it easier to estimate how much interest you’ll accrue. Additionally, federal loans offer deferment periods, so you don’t have to start making payments until finished with school or gainfully employed. There’s also no cosigner requirement. Typically, parents cosign student loans with their children. The problem here is, when students can’t make payments, parents are on the hook. Not everyone has parents who can take on this burden, so not requiring a cosigner can be an important perk.
Only take a private loan if you max out your federal loan amount. Make sure to shop around and compare your options before filling out the paperwork. Pay attention to interest rates and repayment requirements.
Ask questions
How much will this loan cost in total? What will my monthly payments be? Fixed or variable interest rate? Can I get my interest rate lowered? What fee am I paying? Are Income-Based Payment programs an option?
Take them out sparingly
All the money you take out in loans must eventually be paid back – with interest. Only take out student loans if you absolutely must. For some, this will mean one or two. For others, it will mean two or three per school year.
Get a part-time job
A part-time job will help defray the costs of existing. Evening trips to The Varsity, or brunch at Bloom, aren’t covered by meal plans. Working and going to school also help you build your resume and learn time management skills. Plus, working in food service often means discounted or free food – the major food group of any college student’s diet. Most any establishment will offer discounts and perks to employees, so take advantage of this.
Don’t place city limits on where you work – working in Pullman, Washington, where the minimum wage is $11 per hour, means more money for the same time working in Moscow. This would however, require reliable transportation and a longer drive, but it can be worth it.
Save for, and make, payments
As soon as you can, start making payments. Even if these payments are small or not required yet, anything helps in making early progress. Most federal loans don’t require payments until six months after graduation, but during these six months, interest begins to accrue. If your lender doesn’t allow you to make a payment until the six months is up, start building up your savings account and make a large payment for your first installment. Really, you should start building up your savings as soon as you can. The savings could help you pay for the next semester, or make a large payment down the road.
Make a good investment
As a liberal arts major who is also double-minoring in the liberal arts, it feels a little hypocritical for me to say this, but choose a major that is a good investment. Looking at job growth and industry demand in your field is a great way to decide a career path.
If you can’t make enough money to repay your student loans, it’s hard to justify taking on large amounts of debt. There’s nothing wrong with delaying college or reconsidering job options if there’s little financial benefit. Being an adult sometimes means making tough decisions, like pursuing advertising instead of art. Also consider how much education is required in your chosen career path. If it takes three degrees to even be competitive if your dream field, weigh the thousands of dollars of debt it will take to get there.
According to Forbes, students should avoid graduating with more than their first-year salary in loans. For example, if your starting salary is $45,000, don’t let your loans go over that. It makes them even harder to pay off.
Look for scholarships
Set aside time once or twice a week to look for scholarships. The UI website has a long list of websites, but you can also visit the Financial Aid Office or browse the internet. GPA is one of the most common requirements beside financial need, so don’t look for scholarships during lectures.
Communicate
If you’re not able to make a payment one month, or need to lower the amount you’re paying, call the company or bank servicing your loan.
Don’t forget to let them know when your address, phone number or email address changes. Open every email and letter you get. Ignoring communication could lead to default.
Make a budget
Figure out how much you need per month to exist. Give yourself a cap on discretionary spending – booze, pizza, cute sweaters, etc. Living with roommates, buying used books and keeping the heat low during winter can all help to shave off a few bucks. Moscow is a pretty walkable place, so try walking instead of driving – it’ll save you a gym membership and the cost of gas.
DON’T:
Use loans for living expenses
The easiest way to make adult life awful is to use student loan money for spending money. Every Starbucks latte, delivery pizza and case of beer bought with loan money must be repaid later– with interest. Pepperoni doesn’t taste very good anymore, does it?
Miss payments
Set a reminder, or an auto bill-pay transaction. One payment won’t derail your whole life, but keeping to a strict schedule means less time paying off debt.
Fail classes
You lose $45 every time you skip a class – or so the urban legend goes. The amount goes through the roof when you calculate the money wasted on a failed class. I’m guilty of it, and the feeling is not fun. There are countless resources when it comes to keeping up with classes, like the Writing Center, tutoring in the library, office hours and study groups. Find what works for you and get every penny’s worth out of your classes.
Waste big chunks of money
Instead of spending a birthday check or Christmas money on a shopping spree, use it to make a large payment on loans. Getting ahead can be really helpful in the long run.
This list makes student loans sound scary – and they kind of are. But being prepared, doing your research and asking questions will make it easier. Don’t forget to use resources on campus, like the Financial Aid office. And remember, many people here are in the same boat as you, and everything is going to be OK.
Tess Fox can be reached at [email protected] or on Twitter @tesstakesphotos