Student loans provide you a way to help finance your educational expenses. Student loans work on the assumption that you will be able to earn more money in your lifetime if you earn the degree you are seeking than if you didn’t have that degree. Essentially, you are borrowing now assuming that your future earnings will be sufficient to repay the loan.
Here are a few key things to remember about student loans:
- Loans must be repaid with interest
- Loans may be subsidized (interest does not accrue while you are enrolled) or unsubsidized (interest accrues while you are enrolled)
- The standard repayment term is 10 years
How much should I borrow?
This answer varies depending on who you ask and the degree you are seeking. One piece of advice that applies to all populations is that you should keep student debt to the minimum that you need in order to cover your essential educational expenses. Consult with your financial aid officer to learn your loan eligibility.
For undergraduate students, there are two popular trains of thought. One is that you shouldn’t borrow more than what you expect to earn your first year out of college. This is based on the field that you are entering and the current job market for that field, and assumes that you won’t change your career plans. The second train of thought is that you shouldn’t borrow more than the cost of attendance for one year at your institution.
Graduate and professional degree students don’t have one consistent type of funding available. Some students are funded through a variety of resources that help support tuition, health insurance, or stipends, or all three. Some students have no institutional support and the student will rely more heavily on self-funding or borrowing (i.e. parents, government, student loans). Graduate students should pay particular attention to their appointment letters provided at the time of admission. The advice that you shouldn’t borrow more than you need to finance your essential educational expenses is sound for graduate and professional students.
How do I choose a repayment program?
Federal student loans offer a variety of repayment programs, and some private student lenders offer repayment options. Here are a few tips about repayment:
- Programs other than the standard repayment program usually result in you paying more over the lifetime of repayment than the standard program. Do the math and make a decision that works for you.
- You can usually change repayment programs if you need to.
- Be in touch with your lender if you expect that you can’t make a payment or have had a change in income that will result in you not being able to fulfill your payments.
Should I consolidate my student loans?
Loan consolidation refers to combining multiple student loans into a single loan. Only federal loans can be consolidated. Consolidation may or may not be beneficial, depending on the interest rates on the initial loans and the resulting consolidation interest rate. Take time to research how consolidation will affect your loans.