Families should be well along the way on the college selection and admission process at this point in the senior year of high school. Those who have applied early enough should start receiving acceptance letters by the end of the year. Along with the good news, the colleges might include a financial aid award letter. For some parents a sense of dread soon follows as they realize how much of a financial drain this college education is going to put on the family’s budget.
It can be difficult to keep up with current household needs, let alone have to come up with thousands of extra dollars per year for their student. That is when some families turn to the idea of student loans, but hasty decisions here can have negative long-term financial consequences for the parents and the student. The first place to obtain help is through federal student loans, and that requires filling out a FAFSA to determine your eligibility. Don’t delay this crucial step as the loan rates are fixed and interest might be waived during the college years for subsidized loans.
If federal loans don’t meet the anticipated financing gap of attending the preferred college, then families might turn to the option of private student loans. While federal student loans are all alike, private student loans can be quite different. Here is what to look for when evaluating student loan lenders:
- Reputation: First of all, and perhaps most importantly, you want to be sure you are dealing with a reputable lender. Look online for reviews and negative cases. Check ratings and reviews, and ask your friends and family if they have ever borrowed from this company and their experience.
- Ease of access: You want to work with a company that makes the process easier, all the way down the road. It starts with a simple application format, and includes having a customer service team that is ready to help whenever needed.
- Personalized loan package: You want a lender who will work to develop a student loan that meets your exact needs, not someone who only offers a one-size-fits-all proposition.
- Types of loans: Depending on your situation, a lender should be able to offer undergraduate, graduate, and parent loans, but also check to see if they offer refinance loans if that should make sense for your financial situation in the future.
- Cosigner: Since students usually have insufficient credit history, it is likely that you will need a co-signer. You and this person are equally responsible for repaying the loan so be sure to make on time payments to ensure both credit histories will not be negatively affected in the future.
- Interest rates: Be sure you understand whether the loan has a fixed or variable interest rate. A fixed rate is set for the entire term of the loan, but a variable rate can change. Since the Fed is indicating that rates could go up, this might be an important factor to note. Also find out whether you will need to pay anything while your still in college, or if payments are deferred until after graduation. Does interest accrue that is added on to the loan balance during that time.
- Length of loan: How long will you have to repay the loan? A shorter repayment term will usually mean higher payments, but the total amount you pay might be lower. Sometimes a longer term loan can look appealing until you add up the total amount due. Think about what your financial situation will be after college so you can make the best choice.
Be sure to look for a lender who has no fees to apply or penalties for early payoff. One reputable lender, College Ave Student Loans, has competitive loan options and it’s simple to apply on a laptop or mobile device. You’ll get an instant decision and will immediately know where you stand.