Compare Student Loans
Students preparing for the start of a semester at college have a very long to-do list. They have books to buy, dorm rooms to decorate and classes to sign up for. In this hectic environment, it can be all too easy to snap up the first loan that comes along, without bothering to even examine the other options that might be available. It’s understandable, but it can be pretty costly.
Those students who don’t compare may get a loan that isn’t quite right for them, and they may even incur debt that wasn’t really required. It’s a good policy to make sure you find exactly the right loan for your financial needs. Repaying debt isn’t easy, and it can have consequences beyond being a financial burden. A study from Northwestern University even suggests that a high debt load can lead to depression and high blood pressure in some college students. If health and happiness are on the line, it pays to be smart and take the loan process slowly. Comparing student loans can help.
Most people shopping for loans know that they should look at the interest rate of that loan. This little percentage makes up the bulk of the fees the student will pay when the loan comes due, and as a result, it’s one of the most important numbers included in a loan document. However, it’s not the only number that students should pay attention to as they shop.
Some loans include a variety of little fees for transactions such as:
- Opening the loan
- Making a late payment
- Deferring payments
- Paying off the loan early
All of these little fees can add up to big money down the line, and they’re worth including in any loan comparison.
Loans may also have different repayment start dates, and while that might not impact the cost of the loan, it can be an important part of the budgeting process for a student. Those loans that have immediate payment start dates, for example, might force a student to make loan payments while that student is still trying to complete an education. Loans like this might seem like a bargain, until the burden of paying back a loan while in school is taken into account.
Some loans, particularly loans that come from the federal marketplace, have repayment options that could be very favorable to some students. These loans might allow students to cap their payments at a certain level, so the loans won’t kill their budgets when they’re done with school, while others have extended repayment options that might include balance forgiveness. Little tweaks like this could make day-to-day life easier, but they might also have an impact on what a student pays in the end. CNN Money did an analysis of payment plans, for example, and found that a loan of $25,000 could result in a payment obligation that ranged from $35,000 to $52,000, depending on the payment plan the student chooses, as well as the interest rates of the loan. It pays to really read the fine print of the schedule.
Worth the Effort
While borrowing money might make some students nervous, experts agree that going to college is one of the best ways to improve a student’s station in life. In fact, in an article published by the Brookings Institution, experts suggest that those students from low-income families who complete four-year degrees have a better shot at the middle class, when compared to students who don’t get degrees. However, these students might enroll in low-cost schools that don’t push them to graduate. A loan might help them to find a better school and improve.