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Options to Consider When Taking Out Student Loans

Student loans are a great way to pay for college. They sometimes get a bad reputation due to some students graduating with large amounts of debt. While that certainly happens, it is not necessary, and there are ways to avoid creating this situation. Using student loans as a tool to help you or your child get an education makes sense, but making smart choices matters as well.

Explore All Your Options

There are many different ways to pay for college. Your first step should be to use methods that do not need to be repaid. Grants and scholarships are awards that lower your tuition bill without the need for repayment, so it makes sense that these should be your first choice. Many people make the mistake of not applying for scholarships they qualify for. It does take some leg work, but the payoff can be significant. The school you attend may offer scholarships, and you can also find scholarships related to your major and even your interests. Taking the time to research what scholarships are available, and applying for them, can save a significant amount of money.

Understand Loans May Be Inevitable

There is no way to deny that college is expensive. Fortunately, even if you exhaust grants and scholarships, you can borrow money to pay for school. Federal student loans are easy to apply and qualify for, as long as you have completed the FAFSA, but do have a borrowing cap. Private student loans often make a better choice. With no cap, you can borrow what you need to cover expenses. Private student loans are like other traditional forms of lending and require a fair to good credit score to qualify. You will need a decent credit history to qualify for a private student loan without a cosigner.

Make Good Choices

The best way to ensure that you, or your child, graduates with a degree and in a solid financial situation, is to pay attention to the process. Keep track of what you borrow. Understand how that will compare with your anticipated salary after graduation. If you plan to work in a high-demand, well-compensated field, it can make sense to borrow more. If your career plan is not as well thought out, or you don’t expect high levels of compensation, you want to be sure you are not borrowing more than you need.

The bottom line is that paying for college is like paying for any other large expense. You hope to save some money up-front to offset some of the costs, and you will need to finance the rest. Lowering the cost of your education lowers the amount you must borrow. You can do this by attending community college for a year or two, spending time applying for scholarships, using work-study to cover some costs, and keeping your grades up so you graduate on time. Take out loans to cover what you need, and no more. If you are borrowing to cover living expenses as well, be realistic, but remember that you will be responsible for repaying that money. Balance what you need to attend school and meet expenses with the debt load you are comfortable taking on.