According to recent news reports, a mix-up related to college student loans at the University of Wisconsin-Milwaukee may end up costing hundreds of former students big bucks. Some graduates had thought they had paid off their loans, only to get a notice telling them one loan had been overlooked for several years, racking up thousands of dollars in extra interest.
How can you make sure you’re not paying more on your student loans than necessary? Use these tips to ensure you understand what you owe and when you owe it.
1. Get acquainted with financial aid terminology.
Grace period. Interest rate. Principal. Subsidized vs. unsubsidized. Consolidation. Origination fee. Promissory note. There are a lot of financial aid terms that may sound Greek to you when you begin the process of looking for and taking out student loans. Become familiar with the terminology so you can make educated decisions about the best types of loans to take out for your financial situation.
2. Know what loans you’re taking out.
The Project on Student Debt, an initiative of the Institute for College Access & Success that seeks to increase public understanding of the impact student loans and debt have on families and society, recommends you keep track of the lender, balance and repayment terms for each of your student loans.
Before you take out a loan, talk with your university financial aid counselor to make sure you understand all the terms. Once you graduate, double check that any billing statements or other paperwork you receive do not omit any of the loans. If they do, call the school and/or the lender to confirm no loan is being overlooked.
3. Learn when interest begins accruing.
The time period when interest begins accruing on student loans is critical in determining how much interest you’ll need to pay over the life of the loan. For example, a federal direct subsidized loan does not charge you interest while you are in school at least half-time—the U.S. Department of Education actually pays that interest for you. A federal direct unsubsidized loan starts charging interest from the date the loan is taken out until it is paid in full. Learn more about the difference between federal subsidized and unsubsidized loans.
4. Keep your contact info current.
Tell your lender immediately if you move, change your phone number or change your e-mail address. The Project on Student Debt also recommends reading every piece of mail you receive about your student loans and don’t ignore bills or phone calls. If there is an issue, it’s best to resolve it right away before you default on a loan, which can have long-term consequences.
5. Communicate with your college’s financial aid office.
If you have to take out a private student loan, talk to your school’s financial aid office first. Ask them to recommend reputable lenders and ask them if there’s any other way to fix the gap between what you can afford to pay and how much tuition costs. Some colleges may work with you to discount your tuition if the gap isn’t too large, or they may help you find college scholarships or grants to cover the gap.
If you still need to take out a private loan, shop around for the best interest rates and terms. “Your education is an investment: borrow smart and only borrow what is necessary to cover your educational expenses,” advises Michelle Hemmer, assistant director of financial aid at William Peace University (NC).
Learn more about finding money to pay for college.
Image credit: Courtesy of ddpavumba/FreeDigitalPhotos.net
Who We Are: Information you can trust. For 20 years My College Guide has produced an annual magazine chock full of free college info for high-achieving high school sophomores and another edition just for high-achieving juniors! Check out our participating colleges.
Subscribe to our blog via RSS or email and stay on top of everything college!