The 6 Costliest Student Loan Mistakes | 04.25.13
Mistake #1: Not comparing college costs
Colleges all write their financial aid award letters differently. Some count student loans as self help, others may include it in your financial aid total. Comparing your awards, item to item, can give you a better picture of where you stand financially with a school. Feeling ambitious? Figure out how much student loan interest will accrue over 4 years at each school to see how your choice can affect you when you graduate.
Mistake #2: Not applying for scholarships throughout college
The biggest student loan mistake you can make is taking out more than you need to. Many students stop searching for scholarships after their freshman year, but by applying regularly, you’re more likely to win money for school and need to take out less loans over your college career.
Mistake #3: Not exhausting federal aid first
We see this all the time. While federal loans might not have lower interest rates than some private ones, the repayment benefits often outweigh any interest savings. Federal loans come with many more repayment plan options, better allowing you manage your loans based on what you can afford. Private lenders aren’t so lenient. Before taking out a private loan, make sure you’ve exhausted your Perkins, Stafford, and PLUS options.
Mistake #4: Not making extra payments
Did you know that you don’t need to defer your loans while you’re in school? You can also make payments on your federal loans at anytime, without penalty, and this is a great way to keep expenses down. Paying off interest on unsubsidized loans while in school could save you thousands, because once repayment begins, any unpaid interest is capitalized (added to the loan’s principal balance), essentially making you pay interest on your interest. So, if you don’t need to put off payments, don’t. If you do, attempt to pay down as much as you can afford each month anyway.
Mistake #5: Not comparing private student loan features
If you still need a private student loan for college, that’s okay, a lot of families use this resource. But before you apply, make sure to compare your options. While one may offer a better interest rate, another may have better incentives and repayment benefits. Make a list of what you’re looking for in a loan and compare private loan options based on what’s most important to you.
Mistake #6: Not keeping track of your loans
Did you know that there are more than 15 student loan servicers that manage federal student loan accounts? Do you know which one holds yours? If you don’t know which company you need to contact to manage your loans, and an issue arises, it could mean a fee or late payment on your account. Keep track of your loan servicer while you’re in school and keep any related paperwork. Hard copies of documents can be a lifesaver, should you ever need them. To find out who services your loans, log in to the National Student Loan Data System which will list all of your loans and the contact information for your servicer.
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