You may have been told to spend responsibly, but has anyone ever advised you to borrow responsibly?
How to Borrow Responsibly:
First, borrow only what you need. Do not add on extra for extras. All of this has to be paid back with interest and that can add up over time.
Second, when borrowing, always consider federal student loan options as they have benefits for students such as not requiring a cosigner.
Third, if choosing a deferred loan, consider making monthly payments while in deferment. Doing so can help to reduce the amount you need pay back after you leaves school.
Fourth, search for scholarships every year, not just during your senior year of high school. Also, don’t disregard the smaller amount scholarships. Every 500 dollars you do not borrow is 500 dollars less you have to pay back with interest after graduation.
Finally, KNOW BEFORE YOU OWE! It is recommended that you borrow no more than your projected first year’s salary over the total number of years you attend school. Most people expect to complete their undergraduate degree in 4 years, but some programs take longer. There are several free online salary calculators that can provide you with projected first year earnings so you can approximate a responsible borrowing limit based on the career you are studying. Use online calculators to see what your estimated monthly payment will be for your education loans after graduating. Will that monthly payment be manageable for you after graduation considering other living expense such as , rent, car, insurance etc.?
What can you do if the numbers are not working in your favor? You may have to choose a less expensive school or consider a shorter-term program and possibly continue your education once you are working and possibly getting tuition assistance to further your degree from your employer. This may not have been your preferred route, but it could be the most responsible one and set you on the best path for financial success in the future.
Once you’ve determined your responsible borrowing amount, compare lenders, rates, and program benefits to get the right match for you. Ask about rates, rate increases, fees, and any program changes over the course of loan, if applicable, such as cosigner release, or prepayment penalties.
Student loans have been around for a very long time. Many of us could not have earned our degrees without them. If you would like more information on private student loans and borrowing responsibly, download our free borrowing guide.