Recently graduated high school? Here's the lowdown on which student loans to apply for.
Posted by Gen FKD on Wednesday, June 6, 2018
In January 2017, I achieved my dream of getting into graduate school for acting. I spent the two years prior training for just the auditions alone. When I got my acceptance letter, I thought there was nothing in my path to stop me. But then I saw the tuition bill. While I managed to secure some scholarships and a job, I will still short of paying off my tuition — which meant I had no choice but to turn to student loans. But I knew nothing about loans besides the stories of students paying thousands and still being in debt. It’s important to have an understanding of students loans before you just sign away your name to years of debt. You need all the information you can get to make the most informed decision.
Before you look into student loans
You first have to calculate your funding gap. Your funding gap is the amount of tuition and other costs such as living you still have the pay after you’ve applied all of your grants and scholarships. Once you have your funding gap, you can apply any personal savings or job income to it. Now, with the amount you have left, you have the option of taking out a student loan. First, take a look at your funding gap and ask yourself: Is this amount too high? Do you have a smaller funding gap at another school? Having a higher education is worth taking out a loan for, but that loan shouldn’t be so high that you will spend the next 20 years trying to pay it back.
What type of student loans should I take out?
First, you should look at any federal loans you receive with your FAFSA. The two most common federal loans are the direct subsidized federal loan and the direct unsubsidized federal loan. A subsidized loan is financially need-based, and the best part of this loan is that the government covers the interest accruing on the loan until you’re out of school. A direct unsubsidized is not need-based, but it does not cover interest accruing, which means you will have interest building up while you’re in school. It’s important to note that students are not expected to pay loans while they’re in school, but when you get out of school and you don’t have a subsidized loan, you will have to pay all of the interest that built upon that loan. There are other federal loans like a direct parent plus loan. This loan is similar to an unsubsidized loan, but it’s under your parents/guardian’s name, and they have to start paying back the loan right away.
If you still need more funding after you exhausted all of your federal options, you can turn to private loans. Private loans come from banks and lenders. You need to be extremely careful when you take out a private loan. The interest rates can be extremely high, and, unlike federal loans, you could be expected to start paying off the loan right away. You do not want to spend years trying to just pay off your interest without even paying off the amount you borrow.
Is it worth taking out a loan to go to college? The general answer is yes, but you need to be smart about it. Taking out any loan at any amount is a bad idea. If you take out a loan that is too much and has too high of an interest rate, you will spend decades in debt trying to pay it back. Try to stick with federal loans and only go into private loans as a last resort. Make sure you only take out the amount you need from a loan. For example, if you are offered a $20,000 loan but you only need $10,000, you can just take out $10,000. You never have to take out the full amount of a loan. You want to put yourself in the best financial position when you enter and leave school. When selecting a school, I can’t suggest enough to take a long hard look at the financial package by each school. You should understand each your grants, scholarships, and loans. Calculate your funding gaps and see which schools are financially feasible.
Again, I want to make sure you know that taking out a loan isn’t a bad thing. You just need make sure you understand what is offered to you and to avoid loans with too high of an interest rate. Going to school should be a great life experience that doesn’t leave you in debt until you’re 50.
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