Taking Student Loans Seriously

With the rising costs of higher education, more people are turning to student loans to pay for their education. If you still need money to cover educational expenses after you have exhausted other aid and employment opportunities, student loans are a good option. Just remember, student loan money is for financing your education, not your lifestyle. Student loans are real money that must be repaid, with interest, so borrow only what you need.

Finding Your "Goldilocks" Loan Amount

The first step to taking student loans seriously is to determine an appropriate amount for you to borrow. You'll want to consider the career path you plan to follow and your eventual income. There are calculators available that can help you estimate how much you can afford to borrow based on your future expected earnings.

Deciding the Type of Loan

The next step is to do your own research to determine the best type of loan for your situation. There are many different education loans available through federal and private sources. When deciding which loan options are best for you, keep in mind that federal loans are:

• Usually less expensive
• Offer more deferment and forbearance options to postpone payments when needed
• Include loan forgiveness opportunities not available through most private loan programs

Each type of federal loan, plus links to their descriptions, can be found in the Federal Loan Programs section of Financial Aid 101.

Private loans are best used as a last resort to help finance any gap that is remaining after family resources, scholarships, grants, institutional aid, student employment and federal loans have been exhausted. You'll also want to think about which lender can provide these loans at the best price. Not all student loans are the same. Having the right lender may save you thousands of dollars over the life of the loan.

Why Paying Back Your Student Loans Matters

Making your student loan payments on time isn't just about avoiding trouble, it's about building your financial future. When you repay your loans as agreed, you're creating a positive credit history. That good credit can help you qualify for things you'll want later, like a car loan or a mortgage, with lower interest rates that save you money.

It also shows lenders you can handle big financial responsibilities, which can make them more likely to approve you for future credit.

On the flip side, missing payments can lead to some serious consequences, like:

• Extra costs from collection fees

• Losing your income tax refunds

• Having part of your paycheck taken (wage garnishment)

• Losing eligibility for more financial aid or other government assistance you might need down the road