Loan Experts - Student financial responsibility

Student financial responsibility

Between homework, tests, class schedules, a part-time job, and the pressure to maintain acceptable grades, college thrusts students into a world of increased responsibilities. And financial responsibility, the one that could most affect you in the long run, often gets lost in the crazy shuffle of your college life.

    Credit card companies bombard you with irresistible offers. Your student loans seem to involve pages and pages of complicated rules and restrictions. All you know is you don’t need to pay them off right now, while you’re still in school.

    Unfortunately, when you’re not familiar with the responsibilities that come with being a student loan borrower or aware of the dangers and pitfalls of credit cards, you could end up in over your head when repayment time does roll around.

    Plan, Plan, Plan

    At the beginning of every semester, sit down and budget out every major and minor expense for the coming six months. Include tuition, fees, room and board (or rent and utilities), books, transportation to and from school, and living expenses like meals and groceries. Use exact figures instead of estimates whenever possible, and don’t forget to leave yourself a hundred dollars or so of spending money each month for unexpected expenses and inexpensive entertainment like the occasional album download or movie out.

    Once you have all your expenses down, figure out how much money you’ll have coming in from scholarships, grants, work-study or a part-time job. Apply your incoming money toward your expenses. Whatever expenses you have left over are what you’ll need to cover.

    Research Your Student Loan Options

    Federal student loans offer low-cost, low-interest ways of financing your education, and should be the first place you look when you still have school costs to pay.

Federal Stafford Loans are available without a credit check to both undergraduate and graduate students and feature a fixed 6.8% rate.
Federal PLUS and Grad PLUS Loans are credit-based loans available to graduate students and parents of dependent undergraduates at a fixed 8.5% rate.

    These federal student loans carry no application fees, no prepayment penalties, and student borrowers can postpone making payments as long as they’re enrolled at least half time.

    If, even after scholarships and federal financial aid, you still have school-related expenses to cover, a private student loan could make up the difference. Some Private Student Loans are available year-round, so you can apply at any time throughout the year, and there’s no cost to apply. Federal student loans typically offer more attractive terms than private student loans, so always take advantage of your federal student loan options before turning to private student loans.

    Ask the Money Questions

    Whichever student loans you’re considering, make sure you get all the information you’ll need to decide which type of student loan is best for you and your financial situation:

What are the eligibility requirements? Will you need a co-signer?
What’s the interest rate? Is it a fixed rate or variable?
Are there any application fees, origination fees, guarantee fees, administrative fees or processing fees
Can you defer making payments while you’re still in school at least half-time
Do you have deferment and forbearance options once you’ve left school
How long do you have to repay? What kinds of repayment plans and options are available

    Keep the Credit Cards Under Control

    Don’t get conned by slick advertising and “free” or “zero-interest” offers—there’s almost always a catch, and that catch can involve interest rates of 20% or more.

    Here are the basic rules that’ll keep you from digging yourself into a pit of credit card debt:

Use your credit cards for emergencies only, or for small regular purchases like gas for your car, when you don’t have $40 in cash on you. Don’t spend more than you have. If it’s not in your budget and you can’t pay for it with your spending money allowance, don’t buy it. Want that new iPod that costs more than your monthly entertainment budget? Save up a few months’ spending money, and keep it off the card.

    Remember that credit cards aren’t like your student loans. You can’t put off making payments just because you’re still in school, and if you’re experiencing financial difficulties or having trouble making your monthly payments, a credit card doesn’t come with deferment or forbearance options that allow you to temporarily postpone making payments.

Don’t Shirk Your Repayment Responsibilities

    We know that life can throw you a few curveballs. We also know that money isn’t always easy to come by. We understand that if you’re having trouble making your monthly payments, you might be embarrassed or just not want to deal with it. But, for the sake of your credit score, it’s absolutely imperative that you communicate with your lenders if you find yourself unemployed or going through a period of financial difficulty.

    Federal student loans offer extended, income-sensitive and graduated repayment plans that could lower your monthly payment and help make repayment more affordable. You also have deferment and forbearance options in case you need to temporarily postpone making payments altogether. If you have private student loans without these federal benefits, you may still be able to work out a workable payment plan with your lender.

    The main thing is to contact your lender. Most lenders will want to work with you. Don’t just stop making payments, waiting for your situation to get better. After enough missed consecutive payments, your student loans could go into default. If you default on a federal student loan, the government can decide to garnish your wages. Having a defaulted student loan could also keep you from being able to take out most other kinds of loans, whether you’re looking to finance a new car, a house or another semester at school.

Consolidate Your Student Loans

    Once you’ve left school or dropped below half-time enrollment, a Federal student loan consolidation allows you to bundle all your eligible federal student loans into one easy-to-manage loan with a fixed interest rate. By consolidating your student loans, you could cut your payments nearly in half and get up to 20 more years to repay.

    With no credit check, no fees and no cost to apply, a student consolidation loan is one of the smartest moves a responsible student loan borrower can make.