No surprise: college is expensive. Need-based and academic scholarships are hard to find and qualify for, so many students turn to loans to help them pay for tuition.
A great many colleges do not warn students of the dangers that accompany loans, resulting in most students having about $20,000 in debt when they graduate. According to the May 12, 2012, article in The New York Times titled “Student Loans Weighing Down a Generation With Heavy Debt,” the United States now has more than $1 trillion in outstanding student loans.
Staying out of debt requires students to think smart.
“My best advice for students to find the best loan option is to shop around,” says Marcy Ashton, assistant director of financial aid. “Usually the best loans are federal; however, the amounts you can take out are limited. I recommend a parent plus loan if you need more than the federal amounts can give you.”
Federal loans are categorized as subsidized and unsubsidized. The difference between the two is a matter of when the interest is charged. For subsidized loans, the loan amount does not accrue interest until after the grace period, or six months after you graduate. For unsubsidized loans, the loan amount immediately accrues interest.
To find out what kind of loans you have, visit your MAX account and check under “financial aid reward.” There will be a list of the scholarships, loans, and grants that you have received for this school year.
If you are worried about the amount of debt you will have when you graduate and want to start paying for your loans now, you can. Most online banking providers will have a way to manage your bills. If you add your loan service provider to your bills, you can start paying off interest on your unsubsidized loans.
Be careful though: you may not have the same service provider for each loan. To find out who your service provider is, visit the National Student Loan Data System at nslds.ed.gov. The National Student Loan Data System is the U.S. Department of Education’s central database for student aid that provides a centralized view of federal loans and grants. It receives data from schools, agencies that guarantee loans, and other U.S. Department of Education programs.
Through the NSLDS website, you can make inquiries about your federal loans and grants. If you have your social security number, the first two letters of your last name, your date of birth, and your federal PIN, you can access your information and find out loan and grant amounts, any outstanding balances, the statuses of your loans, and any disbursements.
If you are graduating and you’ve found out that you have more than one service provider through federal loans, it’s a good idea to consolidate your loans.
“By consolidating your student loans, you have a smaller monthly payment as opposed to multiple costly payments if you have more than one service provider,” says Ashton. “You also have more time to pay back your loans. A ten year repayment plan becomes a twenty to twenty-five year repayment plan.”
Ashton also says it’s a good idea to wait until the four and half month period after you’ve graduated to consolidate. This way you won’t have to pay right away, as you would if you consolidated as soon as you graduated.
On the other hand, there are disadvantages to consolidating. One of them is that you actually pay more because you stretched out the amount of time you have to pay it back. However, you are allowed to make double payments on your loans. Once you are established, you can pay double, triple, or even the entire remaining cost to get out of debt quicker.
If you’re worried that you may not be able to make the payments, certain companies like Mass Mutual offer loan scholarship opportunities. These are scholarships that go towards the amount of loans you have.
The current loan scholarship opportunity begins and ends on February 14. Go to Mass Mutual’s Facebook page to enter the contest. Who knows? You could win $20,000 towards your debt.