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Tips about Student Loans

The cost of going to college is getting more expensive each year and many young adults are taking out student loans to pay for their education.  Before you sign any papers for a student loan, here are some quick tips to keep in mind:

  • Complete the Free Application for Student Aid (FAFSA).
    Completing a FAFSA helps determine for which federal assistance programs you qualify.  Some federal assistance programs, such as grants, give money that does not need to be repaid to students to pay for college, while federally guaranteed loans are low interest rate loans that must be repaid.  It is wise to borrow as much of your needed amount from federal sources first before borrowing from private lenders.  Learn about the benefits of federal student loans

  • Shop around and compare loan features.  
    If you need to take out a private loan, compare agreements offered by lenders to see which one best fits your needs.  Questions to ask include:
    • What is the interest rate?
    • How often will the interest rate change?
    • When do repayments begin?

  • Check the loan amount to see if it's right for you.
    Many lenders factor in tuition and the cost of education expenses (books, school supplies, lab fees, etc.) to determine the loan amount.  Many times they will offer you a loan that is much more than you need to pay for a college education.  Work out a budget for yourself to determine how much of a loan you need, because borrowing too much means you'll be paying more in interest in the long term.

  • Getting a cosigner may offer you a better interest rate.
    Most people's first major loan is their student loan and they usually have little or no credit established yet.  This means that the rates you would get for the loan are higher than for a person with a good credit rating.  One way to get a better rate on your student loan is to find a cosigner with a good credit rating (such as a parent or close relative).  A cosigner shares responsibility for the loan with you, and both of your credit histories will be impacted.  Please keep in mind that your cosigner is responsible to pay the debt if you fail to pay the loan.

  • Avoid "free money" from organizations you don't know.
    Many scam artists prey on students and parents with little or no credit with offers of loan money without a credit check.  Please remember: "If it sounds too good to be true, it probably is."  If a company offers to give you money for college but you didn't request the information or you're unfamiliar with the company, it could be a scam to steal your money.  Get more tips on how to avoid college scholarship scams from the Federal Trade Commission (FTC).