Student Loan Mistakes Most People Make

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Student loans are par for the course for most attendees.  In fact, due to the projected expense of an undergraduate education, they likely had no choice but to borrow.  And, according to studies/surveys, they borrowed more than necessary due to one or more of the following strategic errors…

Borrowed more than necessary.  Studies suggest that students who borrow more than necessary fail to exhaust all other options (e.g., financial aid, grants, scholarships).  Or, they failed to identify other means of reducing the expense.  Perhaps, both.  The reality is, however, that if they have borrowed more than necessary, neither they, nor their family, have properly run a college planning campaign, assuming there was any planning whatsoever.

Failing to pay the monthly interest while in school.  If you can pay the interest while in school, it will help reduce the amount to be repaid over time.  The reality is, however, that most students cannot afford to make the monthly interest payments while in school because, again, neither they nor their family have properly run a college planning campaign, assuming there was any planning whatsoever.

Improperly using deferment or forbearance.  While useful tools that help prevent default on your loans, there are only so many options for their use.  Loans continue to accrue interest, therefore resulting in ever-increasing balances.  The reality is that, if the student and family had properly run a college planning campaign deferment and/or forbearance would be unnecessary.

Consolidating student loans.  While it smacks of common sense, it may have negative consequences for the student.  On consolidation, accrued interest becomes part of the new loan’s principal, with interest accruing on a larger balance.  While consolidation may be right for a particular student, but a properly run college planning campaign will better address consolidation as a repayment strategy.

Failure to find the right private student loan.  Federal student loans are part of the financial aid packages offered by the schools.  Private student loans cover the difference between the projected cost-of-attendance and the finalized financial aid award.  These loans can take the place of Parent PLUS Loans.  There are a variety of lenders with varied rates, and a variety of repayment options.  A properly run college planning strategy will encompass this option.

A variety of additional mistakes can be made.  But, like those above, a properly run college planning campaign will not just prevent, it will eliminate both the common and uncommon mistakes families make when funding their college planning campaigns.

For assistance with your family’s campaign, we await your call.

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