Be a Wise Borrower
As you consider federal student loans to help finance your education, be a wise borrower. Think about your or your child’s future beyond completing a college degree or certification program.
Wise borrowers follow 2 basic rules:
- – Borrow only the money for school that they need—no more
- – Always remember that loans must be repaid
Consider how you’ll manage your education debt when you leave school and finish your grace period. Remember: Every $10,000 you borrow in federal student loans will cost about $115 per month, every month, when you enter repayment. Your school financing begins with a form called the Free Application for Federal Student Aid (FAFSA). Learn more and start your journey toward financing your education.
Borrow Only the Money for School That You Need—No More
Understanding the cost of your education will guide you when deciding how much money to borrow for school. There are always opportunities to save money that will enable you to borrow less.
Your choice of school matters. A very expensive school, while attractive for its reputation, may be out of your budget when you find out how much money you’d have to borrow in order to enroll.
Some questions to ask yourself would be:
- – Is it better to attend a less expensive local school for my first year before I commit to a larger and more expensive university?
- – Can I save expenses by living at home?
- – Does commuting to school make sense? Will it save me money?
- – Should I plan on working part time during the year to help meet my expenses?
- – Am I willing to give up some small luxuries in order to maximize the money I do have?
Always Remember That Loans Must Be Repaid
Otherwise, You Will Face Serious Consequences
You borrow student loans before school actually begins; the funds are often sent directly to your school to help pay your tuition. You may never actually “see” the money, because the financial aid office is handling the transaction. While this is convenient for you, it also makes the process so seamless and easy that you can forget you borrowed the money or how much you borrowed.
In order to obtain a student loan, you must sign a Master Promissory Note (MPN)—a legally binding agreement that you will pay the money back with interest. When you remember that your loans have to be paid back, you’re that much less likely to spend without careful thought or to borrow more than you’ll be able to afford to repay. American Student Assistance® (ASA) and your servicer can help you find a way to manage your loan, including lowering your payments with an extended or graduated payment plan or even getting permission to temporarily suspend payments. Familiarize yourself with those options before you borrow money, but be aware that only in extreme cases can the loan be completely erased.
