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Facing the Facts About College Loans
It is becoming more and more common for students to take out college loans to pay for their education. According to the National Center for Education Statistics, nearly half of all students have taken out a loan to pay for their education, and the average student loan is around $10,000 by the time of graduation.
The cost of education is on the rise, so more and more students and their families are resorting to college loans as an option along with scholarships, financial aid and savings. This means that nearly half of all post-graduates are starting their lives in the real world already in debt- a startling but realistic fact that must be dealt with. In order to better cope with this debt, students and their parents should be aware of the different types of college loans, and of ways to reduce the stress of loans after graduation.
While it is not optimal to graduate with debt, a college degree can increase earning power so that the loan can be paid off. It is important to be well informed through every step of the loan process and develop a good, clear plan for repayment.
Types of College Loans
Students who know that receiving an education will bring on financial trouble should turn to their university’s financial aid office for specific instruction and advice. Many universities will suggest (or require) that the student fill out a FAFSA, or a free application for federal student aid. It is always recommended to fill out a FAFSA before applying for a loan, as some students may be eligible for aid from the government. Those who aren’t, however, are directed to loan options. Aside from federal loans, which can legally have an interest rate no higher than 8.25%, there are also many private organizations that offer college loans, such as SallieMae.
Students should keep in mind that the more loans they take out from different organizations, the more monthly bills and interest rates they will have to keep track of, unless they consolidate those loans.
Consolidating Loans After Graduation
Consolidating loans is an attractive offer to many recent graduates. Most loans give students a grace period, or a period of time (usually around 6-9 months) after graduation in which to secure a job and a place to live. After the grace period, college loans will have to be paid off in monthly increments. Students who have taken out many loans may want to consider consolidating them. This means having them combined into one monthly payment. Aside from federal consolidation plans, there are also individual companies who offer consolidation services. Any company that offers these services should be well researched before a deal is made. There are benefits to consolidating loans that include lower interest rates and less hassle. However, these consolidated loans are often extended and take a longer amount of time to pay off.