Things To Keep In Mind Before You Take Out A Student Loan

There’s no getting around having to pay tuition in one form or another. Not all of us are fortunate enough to have qualified for a scholarship and even less of us are in good enough financial graces to pay for tuition outright.

This means that we’re at the whims and desires of student loan companies to give us the money necessary for any of us to achieve higher education. It seems like a bit of a flawed system that many people need to go in debt to increase their earning power and get a more marketable skill, but it is the way things are and it doesn’t seem to be changing any time soon. The burden caused by having a student loan can be minimized if you understand the process and your terms.

So on that note, here are the parts of your student loan you should be reading at least twice to make sure you fully understand:

Understand Your Grace Period

The grace period of your loan is how long you have until you have to make your first payment. Some lenders will give you up to six months after graduation to begin paying off your loan, with the understanding that you’ll have secured your first post-graduate job and will now have enough money to begin making regular payments. Not all lenders are so kind, with some making you pay immediately upon graduation or even beginning in your last year.

Know Your Interest Rate

While it might seem appealing to have low payments each and every month, if you don’t pay a lot per month you’ll end up paying more over time in interest payments. Paying even an extra fifty dollars more per month can end up saving you thousands in interest payments. Make sure to check your interest rates carefully and then figure out just how much you’ll want to pay on a monthly basis. Using an interest calculator online, you can figure out how much you’ll end up paying in interest over the course of your loan based on how much you put in a month.

Even if you already have a loan taken out, you can refinance your loan with a service like ELFI for a much better interest rate.

Federal Or Private?

Two main types of lenders will be able to service your need for a student loan. This will either be the federal government or a private lender like a bank or credit union. Federal school loans tend to be more forgiving with more incentives like fixed interest rates, but if you shop around with private lenders you might find some with more attractive loan conditions than what the government can provide. Typically, however, the federal loans are easier to deal with as they are less profit-driven than private financial institutions.

Choosing the right student loan can be the difference between being financially handicapped for years to come or legitimately advancing your lot in life. Make sure to do your due diligence before committing to any loans and always read the terms thoroughly. If you have any questions at all, don’t hesitate to ask the agent helping you with your loan, the last thing you’d want is for the fine print to come to bite you in the rear end.