Student Loans: A Basic Guide

BY SYLVIA KOHL

 

Student Loans: A Basic Guide

Only a small number of students are able to pay for college education and the fees related to this type of post-secondary education like supplies, books, and tuition as well as living expenses. But, this doesn’t mean that young people that don’t have money to pay these expenses should avoid college education. On the contrary, they have a few options, including student loans that can help them.

So, a student loan is a special type of loan which is designed for students that need financial aid in order to access and use higher education. According to some sources, there are more than 44 million Americans that have student loans.

How do student loans work?

Before we start explaining how student loans work, it’s good to know that there are two basic types of loans – federal student loans and private student loans. Most students are choosing federal student loans because it’s easy to get one and come with low-interest rates and fair terms. They are funded with taxpayers’ money. On the other hand, private student loans are issued by credit unions, banks, colleges, universities, and state agencies. Most banks have special student loan programs. In most cases, students opt for this solution when they are not eligible for federal student loans and when they need more money.

So, federal and private loans designed for students come with different characteristics, For instance, federal loans have fixed pre-determined interest rates while private student loans have variable or fixed interest rates. Private loans have specific repayment terms set by the financial institution.

Where to find the best student loans?

With so many interesting options out there, it’s quite logical to ask a question like this. The answer depends on a few different things, but generally speaking, there are a few options that have proven to be useful to thousands of students. In order to find the best student loans, you will have to conduct in-depth research with the help of the Internet. You can also use the experience of other students and ask your friends and family.

If you want to speed up things a little bit, then you can also use a comparison website like Hot5.com. This is a website where visitors can read reviews and descriptions of the best student loans written by experts in this field. The best student loan in 2019 may be just a few clicks away when you are using websites like this.

Why take a student loan?

It turns out that there is more than one good reason why students should consider taking student loans. We will use this basic guide to highlight a few of them.

You can get access to the college you’ve always wanted to enroll in

First and foremost, as you probably know, some colleges are more expensive than others. There are situations when students can join some colleges without getting a student loan, but they want to join another one even though they don’t have enough money. This is where student loans come into play. Some people may say that this is an expense that you can avoid, but don’t forget that you are investing in your future. In other words, this is a type of debt that pays off. In many cases, you can witness this right after you’ve finished college and you have a few offers for decent jobs.

Making a better credit score

Loans are not made just for students. In fact, there are many other types of loans and most people have at least one other type of loan in their lifetime. So, it’s a smart move to start building your credit score as early as possible. By taking a student loan, you will get a chance like this. Of course, you will have to pay the monthly installments on a regular basis, but this won’t be a problem for most students because the interest rates are low and there’s enough time to cover these installments.

Great repayment benefits

Due to the nature of student loans, many of them come with great repayment benefits. In most cases, these repayment benefits are associated with federal student loans, but it’s possible to find benefits like this in private student loans too. Basically, as a student, you may have a chance to postpone your payments for a month or two or even for a longer period of time. In some cases, you can also lower the amount of the monthly payment. Finally, there are situations when students were able to remove their debt. All these things make student loans a great tool in the hands of students.

Mistakes to avoid

In order to feel all the benefits of taking student loans and to avoid unpleasant experiences, you have to stay away from a few common mistakes. The following is a short list of mistakes to avoid.

Not reading the loan terms

You should never sign a student loan or any type of loan if you don’t understand how the loan works. In other words, you must be aware of all the loan terms before signing for a loan like this. Take some time and analyze the most important parts of the agreement like the repayment terms, a potential grace period, the penalties for late repayment, the type of interest rates (fixed or variable) etc.

Don’t borrow more than you need

Sometimes, you can borrow more than you actually need, but this is usually a bad decision. You need to be focused on getting the exact amount of money that you need to finish education. You can find extra funds by getting a job.

Not paying more when possible

If you want to save money, it is the best idea to pay more than you are asked for once you get the student loan. So, there’s no need for someone to remind you that you can pay more – you should do this on your own. In order to do this, you can use a tax refund, make interest payments even when you have not graduated yet and more.

Sylvia Kohl is an IT teacher with more than 8 years of professional experience. Her main spheres of interest are e-education and she convinced that learning process doesn’t stop after years in school and university.