August is here, which means hundreds of thousands of students are gearing up to head back to campus. Freshmen are excited to FINALLY be done with high school and leaving their parents’ house, while seniors can’t wait to see all their friends and start the count down to graduation. What I’m pretty sure no one is worrying about is their student loans. When I was in undergrad, and admittedly grad school too, I wasn’t thinking anything about my student loans. I knew I’d have to pay them back eventually, but I was just happy to have the semester paid-in-full and impatiently waiting for that refund check to hit my account. Now that school is done and my loan providers basically want my first (unborn) child as payment, I’m realizing I should have been worrying about my student loans from day one!
4 Things College Students Need to Know About Student Loans
Getting accepted into the University of Miami was probably one of the happiest days of my life. I knew the school was expensive, that my single mother would struggle to pay for it, but that she somehow would because frankly she always just figured things out and made it happen. I knew student loans were a thing and that basically everyone had them so when we completed the FASFA and it said I’d qualified for all these federally loans I thought we were on the right track. Let’s fast forward through an awesome undergrad experience and an interesting graduate school experience….your girl is now dragging around A LOT of student loan debt. I’ve asked myself “what went wrong?” and “how the f*** did this happen?” probably 100 times, but the fact remains that the debt is there. While I realize that because of my family’s financial situation, I probably couldn’t have gotten out of school completely unscathed, knowing what I know now, I could have done things a little different. So whether this is about to be your first year in undergrad, your last year, or you’re thinking about getting a Masters degree, I want to share a few things college students need to know about student loans.
You need to know whether or not your loans will accumulate interest while you’re in school.
I have encountered three types of loans during my time in school; subsidized, unsubsidized, and private. Subsidized loans are based on financial need, calculated by subtracting your estimated family contribution from your school’s cost of attendance and any other scholarships or grants you’ve received. These loans do not accumulate interest while you are in school at least half-time or during periods of deferment. Unsubsidized loans are NOT based on need and eligibility is determined by subtracting your scholarships and/or grants from your cost of attendance. Unlike subsidized loans, these loans accumulate interest as soon as they originate. You are allowed (and I’d encourage it) to pay the interest while you are in school or you can allow it to accrue and be capitalized (added to the amount of your loan). I HIGHLY recommend you pay on the interest that is accumulating while you’re in school. Doing so will help you to pay less in the long run! The terms of private loans are determined by individual lenders, but most begin to accumulate interest as soon as the loan is dispersed.
You need to know if your interest rate is fixed or variable.
This is a lesson I learned within the past two months (hides face in shame). A fixed interest rate is one that does not change for the life of the loan. So if you start at an interest rate of 5.04%, you’ll have that same rate until the loan is paid off (or forgiven). Variable interest rates change on a terms determined by the lender. I personally have a loan with a variable interest rate that changes on a monthly basis. I’ve heard of others that change on an annual basis. It’s important to be aware of this because it effects your payment and often how much you pay overall.
You need to know who your loan providers are.
This probably sounds like a no-brainer, but hear me out. When I first finished undergrad, I was under the impression that all of my loans were provided by Sallie Mae, which had become Navient. It wasn’t until I received a “hey you didn’t pay us” email that I realized I had other providers. At that point, I spent a whole day getting a grasp on the situation. The National Student Loan Data System let’s you see ALL of your federal loans and grants. I also called my financial aid office and had someone list out all of the loans, amounts, and providers. Doing this ensured that I also had the information for my private loan.
You need to know whether or not you will have a grace period after graduation.
I’m pretty sure all student loans have a grace period, or at least all of mine did, but you need to be 100% sure of this. You don’t want your graduation celebration being ruined or job search being complicated by an email notifying you that you have defaulted on your loans. I believe most lenders allow borrowers a 6-month grade period before they expect payment.
Student loans can make you or break you. I refuse to let them break me. I maintain constant communication with my lenders to ensure I stay in their good graces (and my credit isn’t destroyed). The good news for us borrowers is that we are a dime a dozen. Most lenders understand the post-grad struggle and are able/wiling to work with you to find a payment you can afford. You simply have to make the effort to contact them!
Are you done with school? Got any tips regarding student loans for all the coeds heading back to school?