Understanding Loans for College

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Why it Pays to Plan for College

Planning for college can be exciting, but if there’s one aspect of college that’s especially stressful, it’s paying for tuition and other heavy costs.

For many students who have exhausted free money or federal loans, private loans for college make a lot of sense. However, it’s important to pick the right loan, and if you’re able to spend a few hours learning about loans and comparing lenders, you’ll save some serious money later on.

There are a few major benefits to planning for college early. The biggest benefit is lower long-term student loan costs. Early planning means more time to compare interest rates and payment schedules from different lenders.

Why Planning is Important

You’ll also learn about the factors that affect interest rates, and this might give you more control over your loan. With enough time, you might be able to find a cosigner, which can be particularly helpful if you don’t have a very well-developed credit history (and many first-time students don’t). You might have access to more payment options, and with any luck, this will mean loan payments that are easier to budget in the months after you graduate. A little bit of financial breathing room down the line is well worth a few hours of planning.
Finally, planning for college early will allow you to save more money. When you’ve got more cash, you can afford to take out a smaller loan. Even if you’re unable to save much, you’ll at least be able to speak with lenders and use student loan calculators along with other online resources. You’ll avoid bad loans, and in the long run, this can mean hundreds or even thousands of dollars in savings and peace of mind when you graduate.

Actions to Take

Figure out how much you need. Sometimes, this is easier said than done, but you can generally get an estimate of college tuition, textbook and meal costs quite easily through the website of the school you’re looking to attend. After you’ve got a basic idea of what your college will cost per semester, add in any additional costs such as living expenses. Remember to borrow as little as possible from private lenders.
Collect loan quotes from reputable lenders. Many lenders offer quick online quotes to students looking for loans for college. Make sure that all of your quotes are for the same amounts and that payback terms are similar. This will make it easier to compare rates between various lenders.
Use a student loan calculator. These are special online calculators that are specially designed to figure out how much you’ll need to borrow after you’ve exhausted all your options for federal funding.

Tips and Tactics

Read about potential lenders. Some might have special benefits for their members, great customer service departments or other advantages over their competitors, so don’t make the mistake of looking at rates alone to decide where to get your loan.
Knowing what you can afford will make it much easier to find suitable loans for college. Think about your future monthly payments and don’t assume that you’ll get a high-paying job straight out of college. A longer payment period might be acceptable if a lender has flexible payback terms.
Speaking of payments, choose a payment schedule that gives you enough time to get a job after graduation. If you’ll be paying back your loan while you’re still in college, make sure that you’ll be able to handle the payments. Missing loan payments can wreak havoc on your credit, as well as that of your cosigner, so you want to be certain to plan ahead and budget as much as possible.