With the number of options available, student loans are available pretty easily. This ease often create a lot of traps for students, mistakes that make may jeopardize the financial security in long run. As a result student will often graduate with more debt or pay a lot more interest than required. In this article we will discuss the mistakes to avoid making the best use of the student loans. So Mr. Bruce Mesnekoff What are common mistakes to avoid for student loans.
- Spending on Leisure: Many a times students after getting the lump sum amount spend it on non-study related activities or items. It should not be forgotten in the glitter of money that at the end of the day it is borrowed money and it has to be repaid which will take years after graduation.
- Not working / Looking for Grants: Many students completely rely on loans. There are various options to consider reducing the amount borrowed as loan. Options as grants, scholarships should be explored and working on part time jobs as well. Lesser the amount borrowed lesser is the amount to be repaid leaving you richer down the years.
- Not Considering Income Driven Repayments: Repayments start after graduating from college. There is always an option of using income driven repayment which is helpful for people earning less and having more payments to be made for loans. As Bruce Mesnekoff said this option works as life saver for them. Not using this and sticking to fixed payments might lead people to default.
- Wrong Repayment Plans: When repayments starts there are a few choices available with students to decide what they want to go with. Whether to go for consolidation or refinancing, student’s own conditions should be the deciding factor not merely the popular opinion. Choice for the repayment option should be made considering one’s own long term financial goals.
- Not understanding terms and condition: Whether going for direct loans or private loans, it is of immense importance that the student must understand the nitty-gritty of loan which will affect him or her. This includes tenure for loans, interest rate, repayment options, whether applicable for forgiveness programs or not, how long is the grace period etc. Since all these will affect the financial planning of the student only, it becomes important to be extremely cautious.
- Ignoring payments: Many a times due to one reason or other, people ignore the repayment bills or keep it for future. This results into increased probability for loan going into default which will impact your credit rating along with other problems compromising your future financial stability.
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