8 Tips on How to Make Student Loans Work for You

http://www.savingforcollege.com/articles/8-tips-on-how-to-make-student-loans-work-for-you-792

CEO and Co-Founder of College Ave Student Loans, Guest Contributor.

Congratulations! You did it – you were accepted into a great college, you're excited about the next few years and all the new experiences that await. But before you can start celebrating, the hard reality sets in – how do I pay for college?

According to our College Ave "Financing You Education" survey of 1,077 undergraduate college students, the vast majority (81 percent) understand the costs of college education, but they also feel they lack knowledge on how to pay for it. While most students take out student loans as part of their financial plan for college, more than 80 percent do not have a plan to pay off their student loans when they graduate.

So how can you create the best payment plan for you? Here are eight tips to keep in mind as you map it out:

1. Think about your career goals: When deciding where to go to college or how much to borrow for college, consider the goal – what type of career do you see in your future? It's okay if you're not exactly sure, but having an idea of your future earning potential will help you plot the best way to get there. It's a general rule of thumb not to borrow more for school than you expect to make in the first year of your professional career.

2. Fill out the FAFSA: The Free Application for Federal Student Aid, or FAFSA, is always the best place to start. You'll make sure that you don't miss out on any federal aid, and your school will use the information from the FAFSA to put your financial aid package together.

3. Understand the cost of loans so you can control it. No one wants to pay more than they have to for student loans. We often talk about the total cost of the loan, which is the amount borrowed plus any interest charges that are applied over the life of the loan. That means the quicker you pay the loan back, the more you save in interest charges, and the lower your total cost.

   If you need help understanding the total cost of the loan, check out online tools – such as our online student calculator – that show you the total cost over the life of the loan as well as how to save by making payments during school and paying back in fewer years.

4. Manage your money during school to reduce debt later. According to our survey, 74 percent of respondents pay bills outside of school, and 60 percent report they manage their spending to weekly or a monthly budget. See if there is room in your budget to pay a little on your loan while in school – whether it's $25 a month or more – you can help reduce your total cost, and make your monthly payments after graduation easier to manage.

5. Educate yourself on interest rates: According to our survey, only 25 percent of undergraduate students are comfortable understanding interest rates and payment plans. Interest rates affect how much you will pay on the loan above and beyond the initial amount you borrowed. Get a better understanding on interest rates, and find out if there are ways to reduce them by making small payments in school, paying the loan faster, or making automatic payments.

6. Shop around for the best private loan option: Private student loans are a way to close the gap when scholarships, federal loans, and savings aren't enough to cover the full cost of college. Shop around for loan providers and lenders that don't charge you extra fees, offer flexible repayment options and reward you for paying what you can during school. At College Ave, we can help you understand your loan options even before you apply. Our personalized pre-qualification tool will determine if your credit qualifies for a loan and what rates you can expect. The pre-qualification tool does not affect your credit score.

7. If you're a student, get your co-signer involved. The majority of students applying for a private student loan won't have enough credit history or income to be approved on their own, and they'll need a cosigner with good credit to join them on the loan. By getting the cosigner involved early, you'll be able to apply that much faster and easier.

8. If you're planning to be a cosigner, prepare your credit. If you think you may need to cosign a private student loan for your child to help cover the cost of the upcoming school year, prepare your credit the same way you would before applying for a mortgage. Managing your credit can ultimately help you and your student get approved for the loan, and lower the interest rate. Get a copy of your credit report from all three credit bureaus to review your FICO scores and make sure there are no errors. Keep this obligation in mind, and be cautious about taking on other large debts.

Joe DePaulo is the CEO and Co-Founder of College Ave Student Loans, a student loan marketplace lender focused on funding higher education costs. College Ave Student Loans is simplifying the student loan experience so students can get on with what matters most: preparing for a bright future. For more information, visit: http://www.collegeavestudentloans.com/, follow @CollegeAveLoans on Twitter, and Instagram, and visit them on Facebook.