The growing number of student debts are directly proportional to the growing number of students who are looking out for student loans. The reasons for increasing demand for student loans is the cost of education that is not affordable by all instead of education itself being a ‘right’ of every individual. The type of student loan that an individual avails, the interest rates, the repayment method is definitely going to affect the quality of life of the student, during their graduation and / or after graduation. So in order to not hamper the quality of life, a student and his/her parents must make sure that the right type of loan is availed which will contain flexibility of repayment.
It is important for students to calculate the expected salary that they will earn after completion of their graduation. This will help measure the amount of interest that the student can make in regular payments to the bank in order to repay the loan. Students must always keep in mind that their debt should not be more than their expected salary. According to Mark Kantrowitz , the vice president of Edvisors.com, if a student pays more than 15% of his/her monthly income for the student loan then he/she has to follow a very self-denying lifestyle (not being able to fulfil one’s own self desires and interests).
The decision making should also answer the question – “where to apply for the student loan?”. There are two distinct sources: the federal government and the private institutions; which means students have the choice of applying for federal loans or the private loans. Federal loans are relatively more advisable due to various factors such as fixed interest rates (this helps students to anticipate their budget efficiently) and repayment of loan starts after the student is employed. Whereas most private loans require repayment of loans to start immediately, also their interest rates show variable behaviour.
Now, here is a ‘red flag’ that students have to be very much aware of , the rapid increase in student loan scams. US has reported increase in number of students debts and student loan scams. Unauthorised mobile calls, emails and social media messages – if any company contacts graduates offering help for student loan ‘out of the blue’ , the students must be very careful before applying in such companies and research thoroughly about the company before taking any step.
Demands for fees directly – in case a company asks you to pay lump sum amount of fees for processing the application , this is a clear sign that they are not concerned about helping the students rather expect huge fees to be paid. The company promises to forgive your total debt – it is phenomenally hard for students to have all of their loans forgiven. Even the federal government requires the students to qualify certain criteria to forgive the student loan. Companies take advantage of juvenile and susceptible graduates to trap them into student loan scams.
Public service loan forgiveness is provided to graduates who take up jobs of public service (public school teacher, member of the military, working for municipal body or federal body, member of non-profit organisations). The students who opt for this career choice, the repayment of loan is based on the income of the individual. In some cases after 120 qualified payments, or after 10 years of repayment the individuals can request for loan forgiveness.
The federal government also offers scholarship and grants to students where there is no repayment involved. Students should apply in the Free Application For Federal Student Aid Or FAFSA which approaches students with scholarship options, grants and work fund loans. For the scholarship, the students can participate in various activities like spell bee contests, community service programs held in national level.
The students must have a repayment plan in mind, factors like term duration of repayment and the amount to be repaid in regular intervals. One important aspect to be kept in mind is that the longer the repayment duration , the more number of payments it involves. The advantage of extended repayment option is that the amount of regular payment reduces, making it less burdensome for the student. As discussed earlier, federal loans offer lower interest rates and fixed interest rates, and in some cases help the graduates to get excused from repaying (under certain eligibility criteria). Federal loans are safer and secure and prevent students from getting trapped in student loan scams.
