Student Loan Mistakes
Congratulations, you made it out of high school and you are on your way to college. So how are you going to pay for it? Those that don’t have a scholarship or have a college fund are left with taking out loans from a lender or busting their butts to pay for school. So if you decide to take out loans for school at least do it responsibly. Here are some common mistakes that some students make when taking out a loan to attend college:
- Borrowing too much money. Don’t take out more then you need to pay for your tuition, books, supplies, and housing. Please don’t go on a shopping spree with the money that you get from a private lender or financial aid. You need to remember that you will have to pay back all of the money that you borrowed to pay for your education.
- Be aware of your student loan balance and interest rate. You need to check this each time that you take out a loan. Make sure that the balance is correct and that the interest rate has not changed.
- Ignoring your student loan payments. Please don’t do this. If you fail to pay your student loans or if your student loans go into default because you decided not to pay them your wages can be garnished and your tax refund can be withheld to pay back the loans if you got the loans through financial aid assistance. That is a federally governed program and they can take away your refund. Only in death can your student loans be written off. So if you think that you can write off your student loans through bankruptcy think again. If you die then the student loans disappear; however if anyone like a parent co-signed for your student loans they are responsible for paying the loan back to the lender.
- Don’t choose the wrong payment method. When you are in the process of paying back your loan you can choose the payment method that is best for you and your financial situation. If you can’t afford to pay back your student loans right away after graduating then there are a few options that you can get approved for. Two of these options are to defer your student loans or apply for a forbearance. You can defer your student loans up to 12 months, but keep in mind that the interest is still accumulating. There are also income-driven repayment plans, pay as you earn repayment plans, income-sensitive repayment plans, and the list goes on. Also, you can consolidate your student loans into one loan rather than several individual loans. I recommend this method so that you only have to make one payment to one lender.
- Don’t use your student loan money for personal expenses and trips. If you have any money left over after paying for your education then set it aside or save it. Remember that you have to pay back this money. If you decide to save the extra money left over try investing it or purchasing something that will help you with your education or career like a laptop to do your assignments, medical gear if you plan to work in the medical field. If you already have everything that you need and don’t need to purchase anything we would advise you to place the additional money into a mutual fund so that when it is time to pay back your student loans you would have accumulated money.
- Not checking to see if you qualify for a scholarship or grant money. If you are applying for colleges why aren’t you looking into scholarships and grant money? If you have a skill, if you are an athlete, if you are a minority there are a lot scholarships and grant money out there for you. Do the research and see what you can qualify for. Check out this website for scholarships that you might qualify for https://studentaid.ed.gov/sa/types/grants-scholarships
- Save money by going to a secondary college or community college for the first couple of years. Get your electives out the way at a community college rather than a University. It can save you money and once you complete your coursework just transfer to the University of your choosing and take your required courses to graduate. If you are taking out loans especially private student loans you want to save as much money as possible on your education. Companies that you apply for once you graduate won’t care where you got your general education courses taught at.
- Don’t take out private student loans. Education is very important, but so is choosing the right lender. Private student loans are normally through a banking institution or Sallie Mae. The problem with private student loans is that they offer fewer protections then if you were to take out financial aid which is government funded. The interest rates on private student loans are typically higher than other student loan programs out there. One of the main reasons why you should never take out student loans is that some private lenders might not help you out during difficult times by adjusting your payment plan based off your current income. With financial aid students have several repayment methods to choose from.
- Co-signing for someone else’s student loans. Co-Signing is never a good idea. Typically parents or a spouse will co-sign for someone’s education, but if the student is unable to repay back the loan it falls onto the co-signer. If you cannot financially pay the student loan back then you could mess up your credit and worse someone else’s.
- Make sure you do your homework. Never borrow more money then what your salary will be for that position once you graduate. Borrowing $80K for a communications degree for a position that only pays you $45K does not make since. It will be extremely hard for you to pay that money back because you won’t be making enough yearly.
- College is longer than 4 years. Most students do not graduate in 4 years. Some take longer to graduate. So make preparations for the long haul if you decide not to take summer courses to graduate on time.
- Not filing for your educational tax credit. Yes, you do get a tax write-off if you are attending college. The Lifetime Learning Credit can save you $2,500 a year. That is money back in your pocket. A smart move would be to use that money that you got back on your taxes and pay some of your student loans off.
We hope that some of these student loan mistakes help you on your journey to getting the education you want without the hassle and financial stress. If you have any other student loans mistake suggestions or have a story to tell us about student loan mistakes please comment below and let us know.