As Americans, we’re no strangers to student loans. It’s estimated that at least two out of three students would have some debt to pay off after college.
Some of these debts can be very high, while some can be manageable depending on the channels and company they choose to take a loan from.
Green Sprout is a personal finance blog that aims to empower everyone to achieve their financial objectives.
Before taking out a loan, the authors advise you to learn as much as possible about student loans and ensure you fully grasp what you’re getting into.
Never Borrow More Than You Need
Undergraduates not dependent on their parents for financial support can borrow up to $31,000 in federal student loans throughout their undergraduate careers.
In comparison, those who are can borrow up to $7,500 annually. Private loan amounts cannot exceed the total cost of attendance (including tuition, room and board, transportation, books, fees, and personal expenditures), excluding grants, scholarships, or other need-based aid.
According to GreenSprout, loan payments should not exceed 10% of your anticipated monthly income after taxes.
With a yearly income of $50,000, your payments on student loans shouldn’t be more than $279 each month, allowing you to borrow roughly $26,000 at today’s interest rates.
Consider Federal Loans before Opting for Private Ones
Both government and private lenders provide many loan options. Start with the Federal Student Aid (FASFA) Loan Program.
Federal student loans are better because they don’t require that you have a good credit history to get approved, and they come with flexible repayment options and loan forgiveness based on your salary.
According to GreenSprout, there are two sorts of federal loans you could be eligible for: unsubsidized and subsidized.
Interest does not accumulate on subsidized loans for those with demonstrated financial need. The same doesn’t apply to unsubsidized loans.
First, exhaust all federal loan options before considering private loans.
Understand Your Repayment Options
Many things, such as your chosen field of study and eventual salary, might affect how much money you’ll be making after graduation and, thus, how much money you’ll have to put toward paying off your student loans.
Borrowers should research average salaries in their intended profession and related industries to understand the range of possible future incomes and how that would affect their ability to repay a debt of any kind.
You can learn about this through the federal government’s Occupational Outlook Handbook.
Learn about How the Debt Will Affect You
One of the main benefits of taking out a loan is that the money you receive can help you reduce the hours you work and concentrate more on your studies to earn your degree more practically.
Getting a college education is a money well spent, according to the experts at GreenSprout. College grads make significantly more money than their non-graduate colleagues throughout their careers.