How to Stay on Top of Your Federal Loans
Learning to handle student loans is essential for many college students. In 2013, for the first time, student loan debt was higher than credit card and auto loan debt, and many students are struggling to figure out how they’ll pay it back.
A student loan can be a form of “good” debt, because no one can take your education away from you. It’s an investment that never loses value. The key is to borrow only what you need and no more. When you keep your loan balance to a minimum, you lower your repayment amounts after graduation.
But how do you know the right amount to borrow?
Consider carefully your future earning potential. Investigate what kinds of salaries people in your chosen career typically earn. Visit O*NET Online to look up your intended career and see how much professionals earn in that field. Then decide how much of your future paycheck you want to spend on monthly loan repayments.
Steer clear of private loans from banks and stick to federal loans like the Federal Direct Loan Program. Government-subsidized loans can be helpful because they have low interest rates and flexible repayment options. For undergraduates, the federal program allows students to borrow $5,500 their first year, $6,500 their second year, and $7,500 in each of their third and fourth years.
Students in some fields can pursue career opportunities that offer forgiveness for federal loans. For example, some graduates who go to work in public service may have their federal loans almost entirely forgiven.
Here’s a tip: sign up for an online tool like Loanlook.com to keep track of all your federal loans and get updates. There’s even a free app you can download to your smartphone for push notifications. These tools are a convenient way to stay on top of your loans.
Bottom line: before you sign a promissory note, make sure you read the fine print and understand what you’re committing to. Think ahead, know your limits, and borrow responsibly. Your education is worth it!