Are you thinking about going to college? If so, you may be wondering how you can afford it. On average, college in America costs around $132,000 for a 4-year degree, not including accommodation. This is an enormous amount of money, and as a result, many students choose to remove a loan to be able to afford their education.
If you are thinking about applying for a student loan, it is first important that you do your research, as this is a big financial commitment. Here are some things you need to know about student loans before you apply for one, and how you can start paying it off.
What You Should Know Before Accepting Any Student Loans
- Opt for a Federal Loan Before a Private Loan
When applying for student finance, you can either choose a federal loan or a private one. You should consider getting the maximum amount of federal loans before applying for a private loan. This is because federal loans do not use credit history, and are often more forgiving than private plans.
There are two types of federal loans: subsidized and unsubsidized. Subsidized loans are for those with financial need and do not build interest while you are at school, while unsubsidized build interest. Once you have gotten money from a federal loan, you can then get the rest privately.
- Only borrow what you need
When applying for a student loan, it can be tempting to borrow the maximum amount of money possible. However, before you collect any loan, you must ensure that you will be able to afford the repayments. You should ensure that your payments will be around 10 percent of your projected after-tax income.
- You Can’t Use This Loan Money on Just Anything
Have it in mind that, loan money can only be used for education costs. For example, you cannot buy a car with this money. However, you can buy books, groceries, and even off-campus accommodation.
Student Loan Repayment Tips
Once you have completed college, there is no doubt that you will be in a lot of debt. It may feel impossible to get rid of this debt, but there are some ways you can begin to pay off your debt and quickly.
- Set yourself a budget
This is the first and most important task to start being able to pay off your debt. By budgeting, you will be able to start saving money towards your loan. One of the best ways to start saving money towards your loan is to ensure that you cut back on your spending, and make sure you are not overpaying for things such as electricity. Use a website like met ed to work out if you are paying too much on your electricity.
- Pay More Than the Minimum Payment
If you can afford to do this, paying off more than the minimum repayment amount can help you pay the loan off faster. Moreover, by paying more every month and paying off your loan quicker, you will save money in the long term as you will not have as much interest to pay off.
- Start Making Some Financial Sacrifices
If you are really serious about paying off your loan, you are going to have to start making some financial sacrifices. Ensure you are not spending on items you don’t need, such as expensive clothes. Even cutting down on the amount of coffee you buy can help you save money to be able to start paying off your debt.
Going to college is a great experience, and can help improve your job prospects massively. However, it is incredibly expensive, and most people will have to get a loan to afford it. The most important thing when applying for a loan is that you fully understand the process, and know how to start repaying it.