(Newswire.net — December 13, 2021) —
Pursuing higher education is often a smart idea. If you can get an accredited college degree, it will increase your earning potential significantly. Many individuals also find that going to college broadens their horizons as they get introduced to new people and concepts.
Paying for college is not always the easiest thing, though. If you don’t have the money and can’t rely on your relatives for help, getting student loans becomes the next logical step.
As you hunt for student loans, there may be many options open to you, but you’ll want to compare and contrast them very carefully. You’ll also need to remember to ask each of the questions we’ll cover below.
How Long Do I Have to Pay Back the Loan?
You’ll first need to determine how long the entity from which you’re borrowing the money is giving you to pay it back. How realistic does the timeframe seem to be that they’re offering to you? Most borrowers have from 10-25 years to pay back the loan, so you might regard anything significantly shorter than that as less desirable.
When the time comes that you can earn money to start paying back the loan, you might think about comparing the debt snowball vs. avalanche methods. The snowball method is when you pay back any smaller outstanding debts you have before working your way up to the larger ones, like your student loans. The avalanche system is when you allocate money to the debt that carries the highest interest rate first. Both methods can help motivate you in different ways to pay off your debt in a timely fashion.
What is My Loan’s Interest Rate?
Like discovering how long you have to pay back the money, finding out your interest rate is one of the most fundamental questions you should ask when you’re getting ready to take on a student loan. Most borrowers, banks, or credit unions understand that anything over 10% is higher than you’ll want to pay on a student loan. If you can find one that’s right around 7% or lower, you should find that much more palatable.
You must also make sure you understand when you will start to owe that interest rate on what you borrowed. There will often be an automatic deferment clause for the loan that applies to when you are in school and sometimes up to six months after you graduate. However, keep in mind that the loan interest will still begin accruing when the lending entity disperses the funds.
Is This Student Loan Private or Federal?
It’s also vital for you to know whether you’re taking out a federal student loan or a private one. If you’re pursuing a federal student loan, the US government is the entity from which you are borrowing. If you’re taking on a private loan, you’re getting that money from a lender in the private sector.
These two loan types are often pretty different from one another. If you compare them, you’ll likely see different interest rates, repayment options, and benefits. Many individuals prefer federal loans since you’re likely to have postponement options, forgiveness, income-based repayment, and lower fixed interest rates.
Make Sure You Understand Your Loan Before Committing
Like any loan, you want to be certain that you understand everything about the obligation you’re taking on before you sign anything. You might very well carry this debt with you for many years to come, and you want to be sure it’s what you really want.
In addition to asking the questions we mentioned, it’s often helpful to talk over your options with your parents, a school guidance counselor, or a career advisor. The more knowledgeable people you have to weigh in on this choice, the more comfortable you should feel when deciding how best to proceed.