The College Freshman Guide to Student Loans

by Valaney

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So you’re headed off to college in the fall? As a college freshman, you probably want to think more about majors than money, but the truth is that in just four (or five or six…) years, you’ll have to be thinking about that money thing a whole lot harder. These days, the average college student graduates with $20,000 in student debt.

Much of that comes from so-called “safe” and “cheap” federal student loans, but the truth is, you still have to pay that back! The monthly payment on a $20,000 loan can run you somewhere around $200 a month! That’s a big chunk of change when you’ve just graduated, gotten a new job, and settled into life as an adult.

Today, Valaney from CreditDonkey shares with us her insights she’s gain from helping compare financing options including student credit cards with low apr. Instead of just taking out all the loans you think you need right now, take advice to help you navigate the world of student loans and maybe even get through college without going in the hole.

Student Loan Basics

It’s essential that you actually understand what you’re doing when you’re taking out student loans. Examine interest rates, the payments you’re likely to make, and all the terms you’re agreeing to.

For most federal loans, for instance, you don’t have to start repaying loans until six months after you graduate. But if you take a semester or two off in the middle of your schooling, those rules can change, and you may end up having to pay back the loans while you’re still in school.

Here are some of the basic things to know about student loans:

  • Federal loans come in two basic types if you’re applying as a student. (There are also loans for parents, but those are different.) You can get subsidized loans, where the government will pay the interest on the loan until you enter repayment. Or you can get unsubsidized loans, which accrue interest from the get-go. Whenever possible, go with subsidized loans, since they can save you big bucks while you’re in school!
  • You apply for federal student loans by filling out the Free Application for Federal Student aid. It should be filled out in your senior year of high school – preferably before the first of March – and every year after. It’s best to do it as soon as you and your parents, if you’re still a dependent, file taxes, since schools will allocate federal funding on a first-come, first-serve basis according to need.
  • If you have to have chosen a school whose fees will require you to take out private loans as well as federal loans, rethink your school choice. Unless that’s the only school in the entire world with your major, and unless your major is guaranteed to turn into a lucrative job, it’s just not worth your while! Private loans don’t have forgiveness options, income-based repayment, or the super-low rates you’ll get with federal loans. Choosing a school that’s this far out of your price range is just going to put you in a world of hurt after graduation.
  • Make sure you keep all the paperwork for all your loans. If you lose track of a lender, your loan gets shuffled around to a new servicer, or you don’t know exactly how much you have out at any given time, there are ways to figure it out. You can go to the National Student Loan Database to find out about any federal loans you’ve taken out. A copy of your credit report, which you can get for free from each of the three major bureaus once a year, will show you which lenders hold each of your loans so you can get their information.

The key with student loans is to understand what you’re doing. Most of the time, it’s okay to take out a couple of small ones to help with tuition, but if you’re taking out loans for every expense in college, it’s a good idea to rethink your choice, especially if you aren’t practically guaranteed a great job straight out of college!

Staying Out of the Hole

Believe it or not, you really can get an education without actually going into debt. The National Center for Education Statistics actually notes that about 51% of freshmen when to school without taking out federal student loans.

Their parents may have taken out loans, but the students themselves didn’t need to. What are these students doing to stay out of debt when it comes to college?

  • Choosing in-state schools. Despite what the advertising for private, for-profit schools says, you really can get a great education at many in-state public universities. They often have all the same majors, as well as a few big bonuses that smaller private institutions don’t offer – such as more class offerings and research opportunities. With the average cost of a private four-year institution running at $37,400 per year and the average cost of state tuition at a four-year college at just $19,300 a year, you can see the difference!
  • Getting scholarships. State schools and private schools alike tend to offer great scholarship opportunities to students who did well in high school or on their SATs. If your high school grades weren’t stellar, consider brushing up your SAT score and re-applying for scholarships. Even if you have to sit out a year to make it happen, it could be worth your while. Apply for every scholarship you might remotely qualify for in the meantime, and you might be surprised at what comes through for you.
  • Living at home. At most universities, you can cut the cost of college almost in half by not paying room and board. Live at home, and you’ll save money even if you commute to school. In some areas where rent is cheap, you may be able to rent a house or apartment with friends later on, paying rent and other expenses with money from a part-time job. You can still often save money compared with the over-inflated room and board costs at some schools!
  • Getting done faster. One interesting thing about tuition is that usually taking twelve credit hours, a full load, or eighteen credit hours costs practically the same thing. You might pay a few hundred extra bucks for two classes, but your basic tuition costs are still going to be the same.By taking extra classes, taking summer classes, which are often more affordable, and graduating in three years, you can save a ton of money!

These are just a few of the ways you can save on your college education. So, find out what you need to know about your student loans, but try your best using these tips to get out of school debt free. You might seem less cool now taking more classes and living off campus, but when you’ve got a job and a great car while all your friends are still paying for student loans, you’ll be the cool one.

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