Jun 11

The Ins and Outs of Student Loans

So you’re thinking, “Great. I know the sources to pay for education are available, but how much do I really need?”

This is a legitimate question and when it comes to possibly borrowing money, you need to budget and borrow sensibly.

Financing your college education means much more than just paying tuition expenses. It’s important to understand all of the costs involved, including room & board, books, lab fees, student membership fees, online access fees, spending money, etc.

Estimate a personalized college budget with the worksheet below. You can also calculate your Expected Family Contribution (EFC) or estimated repayment costs.

Create a budget for the full school year.
Dorm or apartment? Meal plan or home cooking? New books or used books? Think about ways to keep your costs down. Then use the table below to realistically estimate what you’ll need for the full school year.

Know your resources.
Discuss what your family can contribute and then aggressively go after “free money” options. Add up your total resources from savings, grants/scholarships and work.

How much more will you need?
Subtract total resources (Box B, above) from total expenses (Box A, above). Enter the total in Box C, below. If your resources can cover your expenses, you’re all set. If not, you’ll need a way to make up the difference from student loans and other sources.

Once you decide to borrow, borrow only what you need.
Estimate the amount of debt you may be able to afford and your monthly student loan payment before you borrow.

Borrowing is a responsibility – take it seriously!
If a student loan is your first borrowing experience, consider this responsibility seriously – your ability to borrow in the future depends on it. Make sure you read and understand the terms and conditions on your promissory note. You are agreeing to repay the loan with all accrued and capitalized interest and deducted fees. You are obligated to repay your loan regardless whether you complete your education, are satisfied with your education, or are able to find a job. Read and keep all records relating to your loan.

Choose your lender wisely.
Most loans come from banks and there are differences from bank to bank. When choosing a lender consider:
Interest rates and costs
Interest rate savings options (e.g., reductions for consistently making on-time payments)
Variety of loans offered
Experience in student loan financing

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