August 8th, 2010 
Elisheva Wiriaatmadja The young generation of America are continuously being lied to and told that getting a student loan is a good thing because it is good debt. They say, if it is to invest in a future, it is a good decision to take. However, even without the economic crisis in place today, fresh graduates are facing a very dim future because of their student loan debt. How can it be that the “investment for the future” they made a few years ago now backfires them and has become a heavy burden that many are even thinking of committing suicide to escape their student loan burden, the most oppressive debt that has probably ever existed.
This is the season of harvest for private student loans and federal student loans. Students who go to college this coming fall are now looking for education funding sources to pay for their tuition bills which will be due this month, August. Before deciding to take out another student loan this year, make sure you understand the strategy you could use to help you save money and save yourself from a worse debt trap.
Rule #1 – Exhaust all your options of free money
Before you take out any loan which you will have to pay interest for, make sure you exhaust all possibilities available of free money. This “free money” could be grants or scholarships. There are hundreds of thousands of dollars worth opportunities of grants and scholarships if you can find it. A place to start searching for scholarships and grants is this post with lists of available scholarships for you to look into. Just click here.
Grants and scholarships are funds that you will not have to repay ever. It will be just yours to use towards your education if you can get it.
Rule #2 – Exhaust Your Federal Student Loans Possibilities
After you have exhausted your sources of “free money”, don’t just immediately jump and take out a private student loan. Look into Federal Student Loans first and see if you can a loan from Stafford, Perkins and PLUS (for parents).
Federal student loans are federally guaranteed fixed-rate loans. The general rule of thumb is to try and take out this kind of student loan first and make full use of it before finding a private student loan. The advantage of federal student loans is that the interest rate of these loans are fixed. In addition there is more flexibility in repaying your loan if it is a federal loan. Obama’s current student loan reform can only help students with the repayment if the loan they have is a federal loan and not a private student loan.
Federal student loans also give you the chance to have a repayment suspension up to three years in case you encounter financial difficulties after you graduate. Another big advantage of federal student loans is that there are many programs that allows you to have the remaining balance in your student loan debt to be eliminated and forgiven. If you have a private student loan, this is not applicable to you.
Rule #3 – Understand Private Student Loans Before Getting One
According to a Wall Street Journal article, 66% of the graduates in 2008 have an average student loan debt of $23,000. However it is not uncommon for students to be in debt that has reached six figures. If you look at your debt now, you do not want it to grow to six figures after you graduate, therefore it is very important to choose the funding sources for your education.
You need to know that the biggest disadvantage of taking out private student loans is that you can’t lock in an interest rate. The rate rises and falls with the movement of a certain benchmark. Currently the interest rate is at historic low. However, any rate that you are offered today by the private student loan companies, it is most likely to climb in the near future. The average rate for private student loans is currently at 8 to 8.5 percent.
Most borrowers are not careful enough in comparing and shopping around for student loans. Just because they already have checking accounts in a certain bank, they immediately apply for a loan without comparing the rates and condition with other lenders. Make sure you look around and compare lenders before taking out a loan. You will be saving your own future by not taking hasty decisions.
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With the size of the debt that the average student leaves college with you start to wonder if it is actually worth people going in the majority of cases. after all how many people taking literature of history actually use those qualifications after leaving?
Great info on your blog for Debt Consolidation. If more people would visit blogs like yours and mine then more people would be in a more comfortable financial situation. The info is out there and most are free, they just have to look!
Some good advice here for prospective students. Should really be heeded.
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Thanks for giving your ideas. The first thing is that pupils have a choice between national student loan and also a private student loan where it really is easier to opt for student loan online debt consolidation than in the federal student loan.
One important thing is that if you are searching for a student loan you may find that you will want a co-signer. There are many circumstances where this is true because you will find that you do not use a past credit standing so the financial institution will require that you have someone cosign the loan for you. Interesting post.
Thank you for this article. I’d also like to state that it can end up being hard when you find yourself in school and just starting out to create a long history of credit. There are many learners who are just trying to make it and have a good or positive credit history can sometimes be a difficult matter to have.
I’ve learned some important things as a result of your post. I’d personally also like to say that there may be situation where you will get a loan and don’t need a co-signer such as a U.S. Student Aid Loan. But when you are getting credit through a common creditor then you need to be ready to have a cosigner ready to allow you to. The lenders may base any decision on a few issues but the greatest will be your credit worthiness. There are some financial institutions that will additionally look at your job history and make a decision based on that but in many instances it will hinge on your scores.
One other issue is that if you are in a predicament where you will not have a co-signer then you may genuinely wish to try to make use of all of your financing options. You’ll find many awards and other scholarships that will present you with funds that can help with college expenses. Many thanks for the post.