As students and parents struggle to make the payments for their student loans, many are finding this type of debt comes with strings attached.  Taking out a student loan is different from other kinds of debt and the loans are nearly impossible to discharge.  Financial failure and bankruptcy offers no fresh start as the loan still must be paid off and will often have new collection costs tacked on, making the loan more expensive.

Private lenders can get court approval for wage garnishment for up to 25% of a person’s wages until the loan is paid back in full.  If the loan is a federal loan, the government can keep your federal and state income tax refunds, intercept future lottery winnings and withhold part of your Social Security payments in addition to garnishing your wages.  Parents who are cosigners on their child’s student loan may have to divert 401(k) savings to pay towards the loans, leaving them to catch-up as they approach retirement.

A student-loan default means a lower credit score.  Parents with good credit could see a decline of up to 200 points and students’ scores could drop down to the 500s.  The default can remain on a borrower’s credit score for more than seven years.  After a student loan default, college graduates may be unable to buy a home or obtain other credit.

Borrowers who have defaulted can minimize the financial burden of a default by arranging a payment plan with the lenders or collection agency responsible for collecting on the loan.  If the loan is a federal loan, borrowers can also clear the default from their record if nine out of 10 consecutive full on-time monthly payments are made.  A repayment plan may be worked out to protect yourself from wage garnishment.

Scholarships And Grants

For most individuals, the first step in obtaining money to attend a college is applying for scholarships and grants that can help with the cost of tuition.  Every year, thousands of scholarships and grants are given out in hundreds of different categories to college and high school students across the nation.  The number of scholarships and grants that an individual will qualify is based on a number of different criteria, including grade point average, class ranking, and proficiency in different academic categories.

The monetary value of the scholarships and grants will also vary from instance to instance.  Some scholarships and grants have relatively low dollar amounts, ranging between $100 and $500, while others may provide enough money to pay for a majority of the individual’s tuition costs.  A individual can be granted more than one scholarship or grant and can combine the money obtained from each scholarship or grant to pay for their college tuition.

Student Loans

If you are unable to secure enough money in scholarships and grants to pay for the total cost of a college education, the next step is to apply for a student loan.  There are two different types of student loans that are typically obtained for financing college tuition.  Public student loans are backed by the federal government and are issued by lenders acting as a broker for a specific type of student loan.  Private student loans are obtained from banks and private lenders and often require the signature of a parent or other co-signer accepting responsibility for the repayment of the loan before the loan will be approved. 

There are thousands of different lenders that offer student loans of various amounts and loan terms.  This allows each individual to be able to find a loan product that matches what they need to fund their college education.  The application for a student loan can be filled out online and the applicant will receive a response of approval, denial, or a request for more information within 72 hours of the submission of the application.

By giving students access to capital they can use for a college education, the government and private lenders enable students to pay for an educational experience that they could not have afforded otherwise. Student loans give college students the flexibility to choose the type of school that is right for them and, by allowing the students to defer repayment while in school, the government and private lenders encourage students to manage their own educational decisions and increase access to a college diploma.

Student loans are one of the most expensive types of loans that a person can obtain.  The cost of the loan can range between tens of thousands and hundreds of thousands of dollars, easily one of the most expensive decisions that will be made in a person’s life.  Add this to the fact that many of the people that are looking for a student loan are just out of high school and are not yet financially savvy and you can see how easy it can be to make a bad, uninformed decision that could have dire financial implications on a large portion of the student’s life.

Things To Think About

One of the most important things to research before signing up for a student loan is how much money you will actually need for your studies.  Some people will only need their tuition covered by the loan because they plan on living at home or will have a job while they are going to college, which will pay for some of the items that they need.  Although some people will be tempted to obtain the maximum amount that is offered by the student loan company, it is important to remember that every dollar borrowed will incur interest and raise the amount that you will have to repay once your schooling is done.

Another thing to remember when looking for a student loan is that there are many different loan companies offering different types of cash loans and the first one that you find may not be the best one for your needs.  It is very important for the person to take their time and carefully consider multiple types of student loans to determine which type of loan fits their needs the best.  Different types of loans have different terms so some may prove to be more expensive for the student than others.

One last thing to think about when looking for the best student loan for your needs is the repayment terms of the loan.  Paying the student loan back in a timely manner will ensure that your credit history and credit score will remain in good standing, but you do not want to get trapped into a situation where paying for your student loans means that you do not have the money to pay for the other things that you need to live comfortably.  A lot of consideration needs to go into the decision of which type of student loan to obtain and which lender to obtain the loan from in order to ensure that you are making the right decision for your needs for both today and for the future.