College costs money. Big money! And if you’re reading an article like this, then you know just how much it is. In this article, we are going to identify a few key points to consider before signing any loan agreements, but first it is essential to understand that reducing your borrowing needs as much as possible is extremely important.
The Undergraduate Delusion
Most college students tend to hold the illusion that somehow they will have tons of cash as soon as they graduate. And, truthfully, these illusions are not necessarily unfounded. Most college students have never made more than $300 in a week. Although entry level jobs are not exactly high-paying, there is a good chance a graduate could lock down a job making $800 a week. This seems like a ton of cash when you are a 21 year old college student! But, in the real world, $800 per week is not going to get you too far.
Therefore, do not fall prey to the thought that you can borrow as much money as you want now and pay it back with no problem once you have a job. Your prerogative number one should be to keep your borrowing needs as low as possible, and the most practical way to do this is to work! Now, most college students do not like the idea of working, but simply working on weekends and during the summer can substantially reduce the need to borrow throughout college. A student could even take a business cash advance from a family member to start his or her own company to help earn extra cash.
Where To Borrow
Currently, we are in a very favorable interest rate environment. The Federal Reserve currently has interest rates hovering around all-time lows, which is great for college students. However, simply because rates are so low, does not mean that all lenders are offering the same rates. Make sure you shop around and find the best terms possible.
Public Versus Private
The best place to borrow money for college is from the U.S. government. The Department of Education loans billions of dollars each year to college students. These loans are typically the best for a multitude of reasons including low interest rates, no hidden fees, and you know are you dealing with a reputable company (the U.S. government!).
The 3 most common government loans are:
- Stafford
- PLUS
- Perkins
One additional point you should consider is that government loans will be either subsidized or non-subsidized. The first means the government will pay your interest payments until graduation. The second means you will have to pay the interest payments, but you can get them deferred until graduation.