Are you afraid of paying too much interest on your student loans? Student loans are one of the biggest debt traps you could fall into. Particularly if you are uninformed about the whole process and, as a result, make easily-avoidable rookie mistakes.
According to a report by LendingTree, the era of taking student loans without any financial risks is long gone and students are drowning debt without knowing how to avoid the situation in the first place. In 2008, 69 percent of students took student loans with an average debt of $29,800. A five-figure loan can easily turn into six-figure if you make the mistakes discusses below in this post.
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Here are the 5 important student loan mistakes to avoid.
1. Not seeking Federal Student Aid
U.S. Department of Education has a student loan program known as Federal Student Aid (FSA). They are the ones who manage Free Application for Federal Student Aid (FAFSA). FAFSA is a form filled by students in the United States to find out whether they are eligible for the student financial aid or not.
Here is where most students make a mistake. They believe, Federal Student Aid is only available for a student coming from a poor economic background. This is furthest from the truth.
2. Thinking they are not good enough for scholarships
Lack of healthy self-esteem can cost you more money than you think. Most students instinctively decide that they are not good enough to apply for a scholarship. As a young person, it is normal to doubt yourself and not be fully confident in your abilities. But realize that no one is perfect and to clear a scholarship is not a big deal. Apply on websites like Unigo and find the right scholarship for you.
3. Not being an active participant in the loan process
You are lucky to have parents who can understand and carry out all your student loan formalities like paperwork, documentation, decision making, etc. But this leaves you literally zero knowledge about the whole process and you most likely end up getting a surprise after surprise(after you graduate from college). Don’t let this happen.
4. Not having an estimate of how much they are supposed to pay after graduation
Some students aren’t even aware of how much they will be paying once they graduate. The Federal Students Aid website has a Repayment Estimator that tells you the exact amount based on your income, the number of members in your family, marital status and the state you live in. To use the Repayment Estimator, you just have to log in with your credentials. There is no charge for this service.
5. Choosing the wrong repayment plan
Choosing the right repayment plan is absolutely necessary as your monthly payment is entirely based on it. You can use the same Repayment Estimator I mentioned above to select and calculate your monthly payment. Moreover, the monthly payments are also calculated by keeping your Repayment period and Discretionary Income in mind.
These are the important student loan mistakes you should avoid at all costs. It’s quite obvious that being a student, you are dealing with the financial side of things for the first time. But there is no room for mistake here. If needed take advice from a financial advisor but choose the right repayment plan and know your monthly payment in advance.