Many people make financial decisions about college without considering all of the possible long-term financial impacts. Find out healthy ways to borrow.
It is financial aid season, and many families will find themselves borrowing to pay for education. Borrowing money with student loans in a strategic and thoughtful manner can be a beneficial financial decision (separate from any loan forgiveness that might come from the federal government).
Student loans are a necessary challenge for many college students. Debt will always be debt. Loans often come with high-interest rates and can be difficult to pay off, but they're also the only way to finance a college education for a lot of people. If you plan to take out student loans, it's important that you do so responsibly.
Here are four common mistakes students and parents make when borrowing for student loans—and how to avoid them.
Mistake 1: Not Shopping Around for the Best Loan Terms
One of students' and parents' biggest mistakes when taking out student loans is not shopping around for the best loan terms. There are a lot of different lenders available, and each one offers different interest rates, repayment terms, etc. It's important to compare all of your options before choosing a loan so that you can have the best terms possible.
Mistake 2: Not Reading the Fine Print
Another mistake that students and parents often make is not reading the fine print on their loan documents. It's important to understand all of the terms and conditions of your loan before signing on the dotted line. Otherwise, you may end up paying more in interest or fees than you originally anticipated.
Mistake 3: Borrowing More Money Than You Need
A third mistake that people often make when taking out student loans is borrowing more money than they actually need. It can be tempting to borrow a little extra "just in case," but it's important to only take out as much money as you actually need. Otherwise, you'll end up paying interest on money that you didn't even use.
Mistake 4: Not Understanding Your Repayment Options
The final mistake that people often make when taking out student loans is not understanding their repayment options. There are a variety of repayment plans available, and it's important to choose the one that best fits your needs. Otherwise, you may have trouble making your monthly payments or end up paying more in interest than you originally anticipated.
Student loans can give students the valuable opportunity to attend college, but it's important to borrow responsibly. Make sure to shop around for the best loan terms, read the fine print on loan documents, borrow only as much money as you need, and understand your repayment options before signing on the dotted line.
Take your time and discuss your options and plans with someone you trust. By avoiding these four common mistakes, students and their parents can celebrate at graduation and know they are on the path to both a successful career and student loan repayment.