Although Obama’s administration are trying to lift the burdens of student loan debts by their new Income-based repayment, many students are still struggling with their student loan burden. With the economy still in recession and education still extremely expensive, it is very hard for people not to take out student loans to pursue higher education.

In this credit crunch, credit standards for private loans whether it is student loans or not have tightened. Therefore, some colleges who are ‘for-profit’ are opting to lend money directly to students.

This option may be also worthwhile, but as I am personally against taking any kinds of loan no matter what, I have found some tips for students to protect themselves from any student loan or at least only obtain a little loan. If you are some of the folks who are looking into getting higher education, before you jump into a new student loan and scrutinize your own future with student loan debt, continue reading this first!

• Go to http://www.fafsa.ed.gov/ and then fill out their government aid form to try and get federal grants and loans. If you are going to get financing for your education, you might as well max out your federal grants first because you will never have to pay them back. Then turn to federal loans because the rates are lower, and there is the new income-based repayment plan that gives you more flexible options if ever you go into financial difficulties or get a lower-paying job. When all these resources is exhausted and you still need funding for college, turn to other sources.
• If you finally have no choice than to turn to private lenders, make sure you understand perfectly the repayment requirements, while you are in school and the repayment requirements after you graduate. Be wary of any lender that refuses to provide information on terms and fees. If it is not transparent in the beginning regarding how much  you will have to pay in the end, better find another lender.
• In order to reduce any cost associated with private student loans, try and apply for a loan with a creditworthy co-signer.
• You will find that many lenders are willing to offer you a lot amount of loans even more than you actually need. Do not get excited with all the money they are offering. Remember that the money is not income for you but debt. You will have to pay every single cent they are offering plus all the fees and interest attached to it. Borrow as little as possible, not one cent more than what you really need. Just to make sure that you understand the consequences of borrowing more than you need, depending on rates and repayment schedules, every $100 that you borrow is likely to cost about $200 by the time you have to repay.
• Before choosing a school, make sure you research and ask around for data about graduation rates, job placement rates and average wages. This is even more important if you are looking to go to a for-profit colleges. The maximum student loan that you should take out for a bachelor’s degree is around $45,000 or $25,000 for an associate degree. Anything more than that you should think seriously about finding a cheaper school.
• Always plan and be realistic regarding your expected gross salary that you will receive the year after you graduate. Many fresh graduates are naive enough to believe they can make a 6-figure income from a public service job. When you have your data straight regarding your expected gross salary, don’t give yourself more total student loan than that.
• If you know what your monthly salary will be the year you graduate, calculate your monthly student loan repayment so that it does not exceed 8-10% of your monthly salary.

Although education is extremely expensive, it does not mean that you have to be enslaved by student loans forever. Plan ahead before taking out a loan and make sure you really understand how much of the the student loan debt burden you will carry into the future. To avoid financial distress in your future after graduation, plan how much you take out a loan today.

Popularity: 1% [?]

Powered by MightyAdsense