You probably need a loan because According to statistics collected from 2017 graduates by the Institute for College Access and Success, the majority of college students finish with some level of debt. Loans should be considered only after other forms of financial aid like grants, scholarships, and work-study have been accepted. To qualify for them, fill out the FAFSA (Free Application for Federal Student Aid).
According to The United Aid Group, when applying for your first student loan, you should know the following.
Choose a Federal Loan Instead Of a Private One
Federal loans and private loans are the most common kinds available. Fill out the FAFSA and then apply for federal loans. It’s easier to qualify for federal loans than private ones, and they provide benefits like income-based repayment programs and loan forgiveness.
The federal government offers two types of loans: unsubsidized and subsidized. Interest does not accrue on subsidized loans for students with demonstrated financial need. Private loans do not.
Before considering a private loan, students should exhaust all available federal student assistance options.
The Loan Comes With Interest and Fees
Interest and other loan costs will increase your total debt.
There is a mandatory loan charge, expressed as a percentage of the total loan amount, for all federal loans. Federal direct loans for students now have a loan charge of 1.057%.
When you start making payments on your loan, you’ll also have to pay interest, which is calculated daily and added to the principal. The annual percentage rate (APR) for fixed federal student loans is now 4.99%. Your rate from a private lender will be based on your credit history or that of a cosigner.
There Are Strict Limitations on How a Loan Can Be Used
The money from the loan must be used for tuition, fees, books, supplies, etc.
Loans can’t be used for things like movies, takeaways, or vacations, but they can be put toward things like gas money, food, overseas tuition, and dorm fees.
Don’t Take Out a Loan Unless You Need the Money and Can Afford To Pay It Back
The yearly and cumulative federal student loan limits for undergraduates who are not dependent are $57,500 for those who are and $7,500 for those who are. The total cost of attendance (including tuition, fees, housing and board, books, transportation, and personal expenditures) is the maximum amount that a private loan may cover, less any grants, scholarships, or other forms of need-based help.
Borrow only what you need so that payments don’t exceed 10% of your expected monthly income after taxes. Borrowing around $26,000 at today’s interest rates would leave you with a monthly payment of little more than $279 on an annual salary of $50,000.
Locate Your Servicer and the Payment Schedule
If you take out federal loans, the government will assign your debt to a private company called a student loan servicer. For borrowers with private loans, the original lender has the option of acting as their servicer or transferring them to another organization. At United Aid Group, we value education as a means to a more effective organization. If you need help getting out from under your student loan debt, our advisers will conduct a free consultation to educate you and point you in the proper route.