Student Loan Borrowing - Iowa College Access Network - ICAN

Student Loan Borrowing

You invest a lot of money to go to college. In return, you have more career choices and the opportunity to make more money over your lifetime. Most of the time, the money, time and effort you spend on your education pays off in the future.

To help you with this huge investment, many types of financial aid are available. You may also be thinking about a student loan. Loans should be your last resort for college costs, but if they do become necessary, you need to borrow wisely.

  • Exhaust all financial aid. Search for and use grants, scholarships and other sources of aid that don't need to be repaid before you take out student loans or attempt to use credit cards to pay for your education.
  • Look for other options. Besides financial aid, you might have other ways to help you pay for college including earnings from work.
  • Do your research. Several loan options are available. Take time to learn about each type, and talk to your parents about which option is right for you.
  • Be sensible. Keep the average pay for your profession in mind when you borrow. Will you be able to make your loan payments (and pay all your other expenses) on a starting salary in that field? See average starting salaries in Iowa.
  • Use loans the right way. Student loans are meant to help you with college costs, not support a lifestyle. Since you must repay every dollar you borrow now with interest later, student loans should be used only for education-related costs.
  • Borrow the minimum. Just because your award letter gives you a certain loan amount, that doesn't mean you have to go out and get a loan for that much. Instead, consider creating an in-school budget.
  • Cut back. Find ways to lower college costs and living expenses. Use student discounts and buy generic.
  • Share. Think about sharing certain expenses, like groceries and transportation, with your roommates.

Ask the Right Questions

Many lenders offer private education or student loans, all with different terms, and those terms can really affect how much you'll pay over time. (Remember, it may take many years after you graduate to pay off all your loans.) These questions can help you make sense of the differences.

  • What's the lender's lowest interest rate and fee combination, and how can you get it?
    • Is this combination available for the life of the loan, or only during a limited period of time?
  • Is there a limit on how high the variable interest rate can go?
    • How often is the interest rate adjusted, and how is it determined?
  • Is there a penalty for paying off the loan early?
  • How long can you defer payments while you're in school?
    • Can you defer payments if you go to graduate school?
  • Are the lender's discounts guaranteed or are they subject to change?
  • Will the lender take away your discount for any reason?
  • Would the lender let you defer or reduce payments temporarily because of economic hardship?

Take a list of these questions (PDF) with you when you talk to lenders.

Be Financially Savvy

Do a little research on the different types of loans and the terms associated with them. Make sure you know what the words mean, and if you don't understand what a lender tells you, ask questions until you do. Remember, you're the customer, and a lender needs to satisfy you to win your business.

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