Advice for college students

College is great but it is also expensive. It is very important for you to be fully aware of all the options you have to control costs. For many, failure to understand how student loans work can lead to significant unanticipated costs. A college degree can result in a career path that increases your lifetime earnings by as much as $1.5 million. So, loans become more attractive when viewed as an investment. Typically, a student who makes full use of student loans graduates from college with about $20-22,000 in student loan debt. Compare that level of debt against the likely lifetime earnings and you can see why it is an investment. That having been said, it is always wise to be very smart when dealing with student loans.

Myths about Student Loans

All of my financial aid will be student loans.

Most students who qualify for large amounts of financial aid will find that only a small portion of aid will be in the form of loans. There will also be grants (free money) and federal work-study (a job on campus). A reasonable generalization for most colleges is: the larger the financial need, the smaller the percentage of loans in the aid award. And in those instances where there is insufficient financial aid and/or when you have used up all of your eligibility for federal loans, consider using the tools on SimpleTuition to identify private lenders who may have programs that will work for you.

My credit won’t allow me to borrow.

Students who are eligible for need-based federal student loans will not have to be credit-worthy. They will automatically qualify for the loans on the basis of financial need and not the ability to pay back the loan.

I won’t be able to pay back the loans unless I get a job right away.

Not true. There are many payback options including forbearance (delayed payback); graduated payback plans tied to your earning power at the time; and the ability to extend the terms of the loan to 30 years so that the monthly payments are more manageable. The lender of need-based loans, which under the recent legislation will be completely run by the federal government, rarely goes after delinquent borrowers provided the borrower maintains contact and keeps the lender updated on the borrower’s financial status at any time.