The Student Loan Dilemma: Before and After

Part 1 of our Student Loan Series

Higher education is costly. As an undergrad college student myself, I’ve learned that that’s something we can all agree on. In America, you are looking at a number between $30,000 – $50,000 for four years of schooling in higher education. That doesn’t include the money spent on new clothes, free time, adventures, and food. Then you may find yourself working a 9 to 5 while also going to school full time and trying to have a social life or relationship; it can all be overwhelming. It’s not hard to imagine how many can find themselves barely afloat financially. The good thing is that there is help out there if you look in the right places.

Often students, including myself, are either unaware of the different kinds of help they can receive financially, or they have accepted financial assistance without genuinely understanding the parameters they have signed for. Whether you are a senior in high school applying for colleges, an undergrad pursuing your first degree, or a grad student looking to further your education to the highest level, student loans will be something that you will want to be familiar with. However, there are a few things to keep in mind before you apply for student loans for the first time and some things you’ll have to look out for after you graduate. It is imperative that you’ve thoroughly exhausted any scholarship options that may be available to you. Scholarships aren’t only relevant as you go into your freshman year of college, but every year that you’re in college.

An estimated 100 million dollars in scholarship money goes unclaimed by students annually.

It’s free money! Make sure that you do your research, as there are many different ways you can easily get a couple dollars here and there that will add up and help ease the financial burden that college presents. Some universities have scholarships given to students whose majors place them under specific colleges on their campus. You could even see if companies you are looking to work for in the future might be offering scholarships as well, as most of them do. Even locally, communities love to support their aspiring youth, so check family-owned mom and pop shops, any fast-food restaurants you may have frequented, or any other establishments of that nature. If all else fails, you can never go wrong with just researching to see if the university or college you will attend has any scholarships available for any characteristics about yourself that make you unique, such as your race, ethnicity, etc.

There is also another tool called CareerOneStop Scholarship Finder. Now that you’ve made sure to thoroughly check and apply for as many scholarship opportunities as possible, you can start looking to apply for student loans. When applying for these loans, it’s essential to know the different types of loans you can apply for. Student Loans generally come in two distinguishable categories: private and federal. The funding for private loans is derived from private lenders such as banks, credit unions, state agencies, or schools, whereas the funding for federal loans is derived from the government. Federal loans are the optimal choice for several reasons. Since federal loans are government-funded, the terms and conditions surrounding these loans are set by law, and they are much more lenient and forgiving than a privately funded loaner would be. It is also relatively easier to sign for a federal loan, as you don’t need to go through an underwriting process and provide your credit history, and a co-signer is not required. Federal loans also offer a grace period after graduation, which allows you to grow some financial standing before you are required to start paying off your loans. In addition to that, in most cases, interest does not begin to accrue until after you graduate, which reduces the overall amount you will have to pay. The interest rates tend to be much lower than private loans too!

All in all, it is clear to see that federal loans are the way to go when it comes down to how you are going to invest in your aspirations for higher education. There’s still one more thing to make sure you know before you sign off on student loans. Now that we know that federal loans are the way to go, you must understand the difference between the two kinds of federal loans. Federal loans can be either subsidized or unsubsidized. There are pros and cons, and an optimal time to utilize both of these kinds of federal loans due to their different characteristics. A subsidized loan does not accrue interest while you are in school, and you get a grace period of around six months after you graduate before you are required to start paying back your loans. In contrast, an unsubsidized loan begins accruing interest upon signing for it. However, subsidized loans tend to have smaller loan limits, the maximum amount that you can borrow is less than unsubsidized loans. Also, subsidized loans require that you offer proof of financial need for the subsidized loans. I believe it is better to use subsidized loans as an undergraduate student and opt to use unsubsidized loans for grad school once you have a career and a steady flow of income established that can handle paying off larger debts.

Now comes the challenge of finding the best way to alleviate debts from student loans once you have completed your college career. It may seem like a daunting task at first, but you’ll find that paying back student loan debt can be easy and stress-free with the right strategy. The first thing to do would be to figure out the total value of your debt. You may have taken out multiple loans from various lenders throughout your college career. Only once you understand the total amount you have to pay can you start to devise a plan to pay it all off. After that, you must understand the terms and conditions of each loan that you have to pay off. The different loans you have used will often have various interest rates, payback methods, and grace periods. Most loans’ grace periods can range anywhere from six to nine months, so make sure you know which deadline applies to each of your loans.

Once you have assessed the damage, you may find that the variety of your loans is more than you’d like to manage. If this is the case, it may be wise to consider consolidating your loans. When you consolidate your debts, you take out a new loan that combines all of the different loans you have to pay under new terms that are usually more favorable, such as lower interest rates or lower monthly payments. And with only one loan to worry about, it is a lot easier to organize and stick to a payment plan. However, if you decide not to consolidate your loans, it is time to start paying them off.

When paying off any loans, it is always a good idea to pay off the loan with the highest interest rate first, and if you can, try and pay down the principal whenever you can. It ultimately reduces the overall amount you have to pay. If you can reduce the principal, you’ll have less interest to pay off. Lastly, there are several alternative payment plans to look into that have different criteria to make paying off your loans easier to do. Such as graduated repayment, which allows you to pay low-level payments to accommodate entry-level salaries, extended repayment, which will enable you to extend the amount of time in which you will be paying for the loan, and more. Whether it’s before you’ve graduated, and you are trying to find the right way to go about applying for loans, or after you’ve walked across the stage, you are trying to find the best way to start paying off those tumultuous loans. Equip yourself with the knowledge to make the right decisions and ensure that your transition out of college is a smooth one.

Navigating the world of student loans and the debt accrued after that does not have to be as uncomfortable an engagement as you might think.