As with any major decision you make in life, it takes careful planning to make it through to the end with only a few bumps and scratches. Going away to college is one of these decisions, which comes with many choices. What university will you attend? What major will you choose? And, more importantly, how will you pay for your education? The students not fortunate enough to have a college fund sitting in a savings account are going to have to apply for a student loan.
Student loans are the American way, but it can lead to financial ruin if you’re not careful. Likely, you’ve heard many horror stories of student debts becoming problematic, sometimes even ruining the financial lives of young graduates. But rather than shying away from continued education and obtaining student loans, you can plan better.
Here are a few things you should know and do before you obtain a student loan.
- Find Out Your Potential Salary
Your grace period won’t last forever and once it runs out, you’re going to have to start dishing out payments towards your student loans. In order to pull this off, you’re going to need an income that can afford it. With that said, you’ll need to research the starting salaries for the region and industry you plan to work in. You should also make sure that there’s a good job market for you to enter upon graduation.
- Learn When You Have to Start Payments
Federal loans give you six months after you graduate or stop attending classes before you have to start the repayment of your loan. However, it may be a bit different with private lenders, so you’ll need to determine when exactly you have to begin making payments. If you end up owing money too soon, you will fall into debt quickly.
- Make a Budget
As soon as you graduate, create a budget plan and stick to it. It doesn’t matter if you go directly into your field or end up at a part-time job while living in your parents’ basement. Do whatever it takes to make ends meet while paying off your student loan.
- Consider Refinancing Your Loan
Refinancing your student loans could be a great option to lower your costs, especially if you have a great credit history. The best time to do this is when there are better payment terms available compared to when you first took out your loan.
There are various startups that have entered the student loan industry, offering individuals with good credit an opportunity to refinance their loans for better rates, such as SoFi, Earnest and CommonBond, in addition to refinance options at traditional banks and lenders. Some borrowers were able to save up to $14,000 on their overall loan.
- Watch Out for Student Debt Scams
If budgeting, planning and refinancing don’t help your financial situation, don’t fall prey to student debt scams. These shady businesses have websites that resemble the U.S. Department of Education and offer student debt settlement or forgiveness services. They require a high upfront fee, plus monthly payments.
There are many great schools you can attend, like the University of Southern California. Going back to school for a higher education is the American dream, but it shouldn’t drown you in debt. With better planning, you may be able to get through college and pay off your student loans in one piece.