Before you accept a student loan, carefully review it. Make sure you know what you will have to repay and when. Keep in mind that private loans usually have higher interest rates than government loans. Choose the loan that has the lowest interest rate and, if possible, does not require you to start paying it off until you graduate.
Also, understand that a student loan must be repaid. If you don’t repay it, it will hurt your credit record. A poor credit record will make it difficult—even impossible—to get a loan in the future to buy a car or a house.
In a few situations, the federal government may “forgive” your loan. This means you will not have to repay part or all of it. College graduates who go into law enforcement or agree to teach in a federally designated low-income area for a certain length of time may have part of their student loan forgiven. Ask your financial aid officer for details.
Think of student loans this way: They are an investment in your future, but they also will put you into debt. Many students spend 10 or 20 years repaying their college loans. As just one example, if you borrow $23,000 in a Federal Stafford Loan, you will have to pay $282 every month for 10 years.
(This assumes an 8.25 percent interest rate and a 10-year payback period.) By the time you pay back the $23,000, plus interest, you will have shelled out $33,840! To graduate with as little debt as possible, keep looking for scholarships and grants.
That’s like finding “free” money. Also, use your summer work earnings. If you do take out a student loan, only use it to pay for school expenses. A student loan isn’t money to blow on spring vacations or to pay your credit cards. On the other hand, a student loan that charges 7 to 10 percent interest is always a better deal than putting your tuition bill on a credit card that charges 16 to 22 percent.
You may not have any choice about your work-study assignment, but if you do, look for a job that relates to the career you hope to enter. For example, if you want to become a veterinarian, try to find a work-study job in the Department of Veterinary Medicine or in a related department. Relevant work experience will give you a head start on the competition when it’s time to start looking for your first “real” job.
Another way to get work-related experience is to find unpaid internships or volunteer opportunities. If your dream is to become a journalist, volunteer on the campus newspaper. If your goal is to become a social worker, volunteer at a homeless shelter. If you plan to become a stockbroker, look for an internship at a securities firm. You get the idea.
To avoid becoming a victim of a scholarship scam:
- Never pay a fee for scholarship money.
- Don’t fall for guarantees or claims that someone has information you can’t get anywhere else.
- Know that legitimate scholarships never charge fees and the application information is available to everyone.
Scholarships, grants, work-study jobs, and loans aren’t given out only to incoming freshmen. You can keep applying for financial aid all the way through college. You may think that applying for a scholarship is a lot of work, but look at it this way: If you spend five hours working on a scholarship application and it pays $250, you’ve earned $50 an hour for your time ($250 / 5 = $50). Where else can you get a job that pays $50 an hour?!
Watch for scholarship postings at your major’s departmental office. Visit your college’s financial aid office. (Even better, make an appointment with someone who works there so you can get to know a financial aid officer personally.) And, check out the Internet. Here are for some Web sitesto visit:
- College Board (www.collegeboard.com)
- Fast web—financial aid search through the Web (www.fastweb.com)
- National Association of Student Financial Aid Administrators (www.finaid.org)
- Sallie Mae—scholarship service (www.salliemae.com)
- U.S. Department of Education (www.ed.gov/about/offices/list/ope)
Do you know the most common mistake students make when applying for scholarships? They miss the deadlines! Get a big calendar and circle deadline dates so you’ll remember to get your applications in on time.
