Student loans have long been a burden to many people, as it can take decades for some people to pay them off. Student loans can entail significant interest charges, plus some people may have more than one of these loans. But people can prepare for student loans if they look at what they’re doing first.
We talked with a representative of F.H. Cann and Associates Inc. about student loans and how people should handle them right. We found a few useful insights in our interview.
One thing we’ve noticed about people taking out student loans is that they often take out more money than necessary. Is there a rule for how much someone should borrow?
The best idea for a student is to look at the approximate salary one may earn in one’s first year of work after graduating. I’d recommend a student borrow enough money from that first year or two after graduating.
If you expect to earn $25,000 in your first year, keep your student loans at about $25,000. You’ll have an easier time paying off monthly payments while still having enough money for your other expenses.
Another concern with student loans is that they often have exorbitant interest rates. Is there a way students can keep those rates down?
Many private student loan lenders are willing to charge those high rates on their loans because they figure the students might not understand how these loans work. But federal programs like the Stafford and PLUS loan programs offer lower rates on average. You could have an interest rate about two to three points less if you stick with a federal loan.
I’m not saying that every student will qualify for a federal loan. But all students should at least aim for federal loans before going for private loans. They can take out those private loans after they’ve gotten as much from the government as possible.
Is there a way students can keep their tuition costs down so they don’t spend as much on loans?
They can complete heavier workloads, as some schools may charge a flat tuition rate based on how many credits one completes. You could take more credits and pay less per credit depending on where you go.
One idea to consider involves taking summer classes. Most schools charge less in tuition during the summer. Planning how you’ll complete your courses will help you figure out what you’ll specifically spend on student loans, so you can borrow less when possible.
One complaint people have about student loans is that they take forever to pay back. How can people keep from spending so long paying them off?
I’d recommend students look at the possible interest rates for their loans and the monthly payments they’d spend when paying them back. Check the schedule for paying the loan, and see if it’s at a term you’re comfortable with managing.
Can students also look at the possibility of tuition increases over the years?
I would wait on that until it happens. Borrow based on what you know you will spend, not on what you think you will spend. There’s always a chance the tuition cost will stay the same.