How to Borrow Effectively for College
As the cost of college continues to rise, students need to consider financial aid as one method of paying for their post secondary education. While a student may not need student loans to finance the entirety of their college tuition, it is important to understand how to obtain a loan and which loans may be most beneficial.
Federal Loans Offer Flexible Payment Options
Making payments on a federal loan can be much easier than making payments on a private loan. This is because students may be able to have some or all of their loan amount forgiven if they work in certain professions or if they opt to go on an income-based repayment plan. Depending on how much the student makes per month, he or she may not need to pay anything to the government as the payments are capped at 10 or 15 percent of his or her discretionary income.
You Will Most Likely Need a Cosigner
Unless you have a lengthy credit history and/or a sufficient income of your own, you will most likely need your parents or another third-party to cosign for the loan. Although this is a normal part of the student loan borrowing process, think carefully about the ramifications to the cosigner if you do not repay your loan. He or she would be responsible for paying the loan, which could harm their finances for years as they cannot be discharged through bankruptcy.
Fill Out An Application Like Any Other Type of Loan
The student loan application is much like an application for any other type of loan. You will certify that the expenses are used to pay tuition at an accredited school and have your cosigner provide his or her information along with your own. The form is then submitted either by mail or electronically. Electronic applications can be completed in minutes and a decision on the loan may be made in a few hours. Once the loan has been accepted, the money will be sent to the school and you will start repaying the lender as per the loan agreement.
Getting a student loan can be a great way to pay for college for those who cannot pay for it themselves. If you have planned properly, you will have determined how you will repay the loan ahead of time or may even start repaying it during school, which will keep your borrowing costs in check.