With the rising cost of post secondary tuition it is often difficult to find the funds required in order to pay your way through school, as a result many opt towards student loans – along with the debt that comes with it.
If you think about it, every dollar spent on student loans is a dollar not put towards other priorities such as buying a car, buying a house or starting a family. Having a student loan debt will take money away from building a life after completing post secondary education.
Keep in mind that taking out a student loan can be an excellent step for many to have financial aid when pursuing their studies, however, for others it may be an overwhelming spiral to the difficulty of responsibly managing the loan amount and repayments. Having such easy access to financial aid raises the chances of students making poor financial decisions which leads to graduates having more debt than they can afford.
Before signing on to anything official be sure to know what you are getting into. Here are some tips that may help set you on the right path to be a responsible borrower for your first loan:
- Research what aid is available to you
Before simply opting towards a student loan, research what other options may be available to you such as scholarships, bursaries as well as provincial and federal grants. Meet with your schools financial aid counselor to get yourself on the right path.
- Keep track of the loan amount
It is very important to keep track of how much you are borrowing. Whenever you take out a loan, whether it is a student loan, personal loan or any other type of loan, you must think about how it might affect your future finances. Any money you borrow now must be taken away from any future paychecks. Nonpayment is never a viable option as it will most likely result in high interest charges, late payment fees and might affect your credit.
- Try not to borrow more than you need
It is extremely easy to go overboard when applying for a loan and ending up receiving more money than you actually need. The temptation to spend any extra money on things unrelated to your education is high and this is the easiest way to get yourself in debt. Once graduated, your loan payments should only be a small percentage of your salary. Consider how much you will actually be able to repay by researching starting salaries in your field.
- Understand the terms of your loan
Be sure you fully understand the terms and conditions of your loan. What will be the interest rate, what is the repayment period, when will your payments begin and what your expected monthly payment will be. Once signed, you are agreeing to repay the loan according to the terms stated on the document. If you did not complete your education, did not like the program or are unable to acquire a job in the field you chose, you are still obligated to repay your student loan. Always be sure to keep copies of your loan documents.
- Be sure to make payments on time
Once you are required to repay your loan it is important to make all your payments on time. You are required to pay the full payment amount according to your repayment plan. Inform yourself when you must start repaying your student loan debt, how you can make your payment and any other options. If it ever occurs that you are unable to make a scheduled payment, be sure to contact your servicer to see if any options may suit your situation. It is important to keep your loan in good standing.
Remember that when you take out a student loan the debt will stay with you until it is paid. Consider your goals before deciding the amount you will borrow to pursue your post-secondary education. Planning ahead and knowing what to expect will help you once you start your career instead of opting for student loans simply because they are available. Plan out your education as well as your finances, including the amount you will borrow and the amount you will be repaying to keep you on the right track.