A student loan is a popular way to finance education. Unsurprisingly, I understand the interest and need. Going to college can be expensive.
But before signing on the dotted line, here are seven things you need to know about an educational loan:
- It doesn’t start immediately after graduation.
Graduation doesn’t mark the start of student loan repayment. If needed, you can ask for a six-month grace period that will allow you to settle down first. During this time, you can take the opportunity to look around for job openings in your field and decide how to manage your debt. When selecting a loan, you should research your options and be aware that some offer to refinance, helping students get financially back on track.
For example, if you opt for a private higher education loan, such as a Sallie Mae loan, you can refinance for lower interest rates. Refinancing a Sallie Mae student loan can help you take control of your financial responsibilities by paying your debt in a timely manner. Refinancing has become popular among students and may be needed in the future for your loan investment.
- Student loan forgiveness exists.
In some circumstances, a federal loan can be forgiven, canceled or discharged. This program requires you to serve in government organizations, public sector, non-profit organizations, volunteer work and public services such as military service, teaching and law enforcement.
- Declaring bankruptcy in student loan is possible.
There’s a reason why there are 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. This kind of debt is absolutely permanent until the completion of repayment.
However, if a certain situation is present, you can consider declaring bankruptcy, but as it turns out, it can be one of the most challenging legal processes. It is advisable to consult a bankruptcy lawyer first to help you analyze your situation and determine if bankruptcy is right for you. If you need more information, do visit tulsabankruptcylawyers.
A 2011 study determined that only 0.04% of people who declared bankruptcy and sought to have their loans discharged received a partial or full discharge.
- It will affect your credit score.
Student loans can either make or break your credit account. As a positive effect, Crediful noted it would show your credibility in meeting payments, granted you have the required resources.
On the other end of the spectrum, it can be financially catastrophic if you can’t pay your loan anymore for some reason. Obviously, your credit score will be affected for the worse.
- There are other financial obligations upon graduation
Think about it now: what will be your estimated budget upon graduation? Taking into account your income and expenses, it can give you the rude awakening you might need. Rent, utilities, car payments, grocery bills and debt — these are all the realities you will face once school is over and the student loan repayment comes down.
Plus, high-paying career is not completely guaranteed no matter how confident you are today. It can be painful, but you need to deal with the hard truth of financial affairs. If you think you will be earning six figures in no time upon graduation, you’re in for a surprise.
With that in mind —in the case that you will opt for this kind of financial aid, know that you don’t have to take the full amount. Ask your school administration for a process that will allow you to get only a portion of the loans. This way, you may be embarking on a tough process of repayment, but at least, you are already doing damage control.
- There are no debt collectors with student loans
Loan repayment works differently with the student loan. Instead of a debt collector, your employer will deduct the repayments from your salary before you get it, so once you get a job, don’t be surprised if the salary you receive in your bank account has already been deducted.
On the other hand, it’s good to know that the repayment will be automatically made.
- It is not the only way
Remember,this is not the only financial aid out there. Case in point: scholarships and grants are more reasonable and much more manageable when it comes to financing your education.
Sure, it will not be exactly smooth-sailing as these can’t cover the entire costs of your tuition or your maintenance, but in the long run, you will have a better chance to live a comfortable with no debt weighing you down.
Self-financing is also a great alternative you should consider.
TIP: Don’t easily dismiss free college courses, community college, and other options.