Often, people learn about the cost of college too late – after they have graduated in fact! This is an expensive lesson to learn, as your college probably did not make much of an effort to help you to consider your financial situation sooner. Colleges often do not disclose cost-cutting tactics to students that could save them thousands, because such education could cost a university millions!
When it is difficult to repay. An increasing risk factor for incurring unmanageable debt is to start - but not finish - a professional school or college. In other words, too much college for too little cash. Consider, for example, that the average debt of a graduating college student in the United States is almost $20,000, which is approximately the same debt incurred by one in five students who drop out!
Debt in college already completely overwhelms many borrowers. With regulation changes in the 1990s that require repayment while still in school, this is especially true today.
With the costs of college loans always increasing, it is difficult for graduates to pay their loans. However, most college graduates do pay them back, because college education pays off in the long term.
That’s what it meant?! The way that loans were explained initially is one of the leading complaints borrowers have after repayment begins. Included in the confusion is specific loan terminology that is not explained clearly. Your repayment plans will be affected by your knowledge of the differences among grace periods, forbearance, and forgiveness.
Who is my lender? It is almost certain that your student loan will be sold a couple of times before repayment actually begins, and the lender you originally borrowed from might no longer be the lender whom you owe. Some borrowers also move often, so make sure that your college knows where you are.
Consolidation? By consolidating your student loans, you can combine the many loans you received in college into one, easy-to-manage loan payable to one lender. While many students know little about consolidation, many graduates wish they had known, as it often saves borrowers 5-10%. If you are considering consolidation, shop around, and perhaps even (carefully!) use a private lender to consolidate.
I hate this kind of work. While almost every campus has advisors, most students pointedly ignore them. Usually, students have general program advisers as well as a specific major advisor, but there often is also a career center that can advise students on work opportunities and finances.
Although many students do not begin to take advantage of these free services until their senior years, advising can be very helpful throughout one’s college career. Start early! Get job information, look for internships and for summer jobs in your field. Do not spend time and money only to find that you hate your new job after it is too late to be pro-active.
How long is this going to take? Students often complain about how long it takes to finish a degree, as many find it impossible to graduate within four years. In fact, some frustrated students have even tried suing a college that “breached its contract” by not making classes available in a four-year plan! Be financially prepared to make a longer time commitment.
PLUS loan reminder. Many parents do not know that under the PLUS loans, they are the primary borrowers and not students. There are both benefits and costs for students to be listed as dependents, but students will get more aid if they are independent.
Get advice early and as often as necessary for peace of mind. The multitude of specialists available for college financing includes accountants, financial advisors, and tax advisors. You can learn valuable – literally – information from them. For example, a specialist could assess how much of a $2,500 maximum on interest deductions you are eligible for, and calculate those potential savings into a college budget.
Lifetime learning credits and course challenges. Colleges do not like to advertise the fact that students may not be knowledgeable enough - or are TOO knowledgeable - to take a particular class. If a class is below your education level, it may be possible for you to take a test for advanced placement or to waive prerequisite classes with significant cost savings.
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