College and student loans can be tricky things to manage during the whole college application process and general college experience. In today's economy, people are tightening their belts more and more. Many colleges these days are extremely expensive and virtually impossible for many people to afford on their own. While scholarships, grants, and financial aid are all viable options, not all students are able to attain them.
In this case, many students are forced to consider taking out student loans. There are several important questions to ask yourself before deciding if applying for school loans is the right thing for you.
Can I Afford To Take Out A Loan?
This is not a straightforward question since there are many factors that can affect the answer. You must look at the amount of your loan(s), your interest rate, and the amount of time you will have to pay it back. Other things to consider when answering this question are whether you or your family will have any source of constant income that can be used towards paying off your loans.
What Kind of Loan is Right for Me?
There are several kinds of loans that are offered and it is important to tailor your loan to find your needs. How much time will you need to repay the loan? Are you looking for an extremely low interest rate even if it means you have to pay the loan back faster? Do you want a loan that is need based or non-need based? These are all things to consider when choosing the type of loan you want.
The two main types of loans that you will find are federal loans and private loans. Within the federal category, there are three main types of loans: Stafford loans, Plus loans, and Perkins loans.
Federal Plus Loans are ones that apply most to parents who have full-time or part-time college students. The loan is awarded based on credit history and the cost of the college/university. The interest rate is generally low; however the repayment of the loan starts rather hastily (60-90 days after student graduates).
Generally, federal loans can be obtained through banks, credit unions, or directly from the government. Look into these three types of federal loans first. If you have little success then I would suggest looking for private loans. Private lenders can be a little trickier so make sure that you thoroughly understand everything about the private loan you're looking into before you sign anything.
Is It Worth It for Me to Take Out A Loan?
You must consider your opportunity cost. What are you studying and what degree will obtain by taking out this loan? Will the potential jobs you can get from attending school be worth the debt you get in from taking out these loans?
If you can answer this question and confidently say that it will be worth it, then maybe a student loan is the right thing for you.
Jay has been interested in family, finance and health issues for many years now.
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