Tips for first time student loan borrowers

Even though loans help you get quality higher education, they come with an exorbitant price tag. You’ll have to pay back every dollar with interest. 

Please note that loan borrowing mistakes can be very costly. 

As a first-time student loan borrower, spend some time learning about the nitty-gritty of student loans before you apply for one. This will save you from costly mistakes. 

What’s the cost of my education?

The cost of higher education is more than just books and tuition fees. The Cost of Attendance (COA) encompasses your total education expense, including books, tuition fees, supplies, equipment, transportation, and accommodation.

You can assess your university’s COA via online resources like College Scorecard. 

Tips For Borrowing Student Loans Wisely

1. Find Out More About Your Loan Service Providers

Don’t be caught unaware. Apart from going thoroughly through the loan details, ensure you track down your loan service providers.

It’s easier if you have federal student loans. You can determine which of the nine federal student loan servicers is in charge of your account by logging into your Federal Student Aid Account.

If you have private student loans, contact your loan provider, whether it’s a credit union, bank, or online lender. You can also check your credit report to find your lender’s name and information. 

Ensure you contact your servicer regularly to convey current developments, including switching from the college email address to a personal email. Otherwise, you could miss payments without the correct correspondence. 

2. Know Your Loan

As a first-time student loan borrower, you should research extensively to get the details of your loans—including the amount and the interest rates, and terms. 

Several platforms offer student loans with varying terms and interest rates; therefore, find out more about the lender before applying for the loan.

Heart Paydays is among the leading online loan matching platforms that offer student loans with appealing terms and rates. Ensure you understand the following aspects of your loan:

• The loan amount
• Your interest rate can either be variable or fixed
• The loan’s issue date, and whether it has an upfront fee 
• The first repayment date, and whether or not it comes with a grace period
• The loan repayment period

After gathering all this information, use a student loan calculator to estimate the monthly payments and interest. This will give you an insight into your debt balance every month. 

Pay particular attention to the interest costs, which you can impact by early repayment or refinancing— you can thereby deposit additional payments to save money over time. 

3. Don’t borrow more than you need

As a first-time borrower, carefully consider the loan amount you take. Most student loan debtors wish they’d have taken smaller loans.

If you don’t have adequate funds, student loans can go a long way in fulfilling your educational dreams. However, carefully plan and calculate the cost of your entire education before you take out a loan to avoid large debts. 

It’s not compulsory to take the whole amount offered in your financial aid letter. Estimate the entire cost of your studies and pay some of it with income from a part-time job. The lower your student loans, the quicker you’ll repay them.  

4. Pay off the interest while you’re still studying

Most student loans have a 6-month grace period. This means that you aren’t obligated to make any payments within the first six months of graduation. However, you can still cut down on loan costs while studying.

Repaying your loan while in school will help you reduce your debt burden. Ensure you begin repayment as early as possible. 

Also, consider taking subsidized federal loans. The government usually pays the accumulated interest while you’re still in school. 

With private and unsubsidized student loans, you’ll be forced to repay the interest that accumulates while you’re still studying, which can increase your debt burden.

A good way of reducing loan costs is getting a work-study position or part-time employment. Getting a job will help reduce interest capitalization effects.

Small payments will possibly reduce your debt burden. Make small sacrifices as you study—it’ll help you greatly in the future. 

5. Apply for automatic payments

Some lenders give interest discounts when you apply for automatic loan repayment.

When taking out a loan, ask your lender about the available options. For example, our interest can be reduced by up to 0.25% when you sign up for monthly autopay. 

An added advantage of autopay is that you’ll never miss making any payments. You don’t have to repay your loans each month as autopay runs automatically manually. 

6. Get to know your repayment options

As you consider applying for a student loan, you must research and understand your loan repayment options. 

If you want to apply for federal aid, you’ll get the customary 10-year plan, extended repayments, income-driven plans, etc. If you’re a low-income earner and need to make smaller monthly payments, these options will prove helpful. 

The repayment plan you choose when applying for the loan doesn’t have to last throughout your loan term. You can adjust the repayment plan depending on your financial situation.

However, you can only make adjustments once every year. 

Private student loans have limited options. However, some creditors offer forbearance or deferment if you go back to school or when you have financial difficulties. If you wish to adjust your monthly payments, contact your lender to discuss the options. 

Bottom line

If you take out a loan that you can repay comfortably, you can start your life after college debt-free. Use the tips listed above to borrow wisely and free yourself from financial burdens.