According to a study, 44.7 million U.S. students are in debt. Did you know student loan debt is the second-highest consumer and second-biggest source of household debt category in the USA? Their student loan debt is rising at an alarming rate each year, and it seems like the amount will continue growing. As per the latest student loan debt statistics for 2020, 45 million student borrowers owe $1.6 trillion in the USA.
Education loan plays a pivotal role, but at the same time, it can be a real burden if it is not managed well. Hence, students must keep a few things in minds before applying for an educational loan. You will find interesting ideas that will save you from getting drowned financially.
9 Reminders Before You Plan on Taking Educational Loan
As per the Federal Reserve, approximately 43% of Americans who went to college are in some form of debt. This shows how pursuing higher education has become a costly affair. With no other options, students opt for education loans facility to fulfill their dreams. Almost all students plan on repaying the loans with their job salaries after completing their course. But little do they know how much of a struggle it can be. Thus, if you plan on choosing this facility, here are a few nitty-gritty details you must know so that you face no difficulty while paying the loan later.
Consider your goals and decide on the amount
Before taking an education loan, take some time to carefully analyze your goals, employment prospects, financial situation, and your ability to repay. Taking an education loan is a big step, so you need to act smart right from the beginning. Find out the course fee and decide on the loan amount you need to take from the bank. You also need to determine how much you can pay (from your pocket or savings).
Check the types of federal educational loan available
If you have decided on taking a higher education load, consider choosing federal student loans. They have more benefits than loans from private sources or other banks. Federal student loans offer four types of Direct Loans.
Undergraduate students who can demonstrate their financial need are eligible for this type of loan to cover higher education expenses.
This kind of federal loan is made for professional and undergraduate students. This loan’s eligibility criteria will not be based on your financial need.
In this loan category, you can combine your all federal loans into a single loan with a single loan servicer.
This loan is designed for graduate and parents of dependent undergraduate students who need help paying their educational expenses. Here, your eligibility will not be based on financial need. You will require a credit check to obtain the loan.
Check if you are eligible for the educational loan
“Students must go through the eligibility guideline to be able to take preferred education loan”, says Brad Taylor, career counselor and professional essay writer.
Below, you will find a list of criteria to consider while taking a higher education loan:
- Students must be a U.S. citizen or an eligible noncitizen.
- Demonstrate financial needs
- Must be registered with Selective Service
- Must have a valid Social Security number
- You must be either enrolled or accepted as a regular student in an eligible degree or certified program.
- Maintain satisfactory academic progress
- You must be enrolled at least half-time for Direct Loan Program funds.
- Signature on the certificate statement on the Free Application for Federal Student
- You must prove that you are qualified to obtain a degree by:
- Having a high school diploma or General Educational Development (GED) certificate
- Completion of high school education from either home school setting approved by state law or,
- Enrolling in an eligible career pathway program
Research about the banks
Several banks offer educational loans, but not all of them are right for you. Consider availing an education loan from the bank that offers the best moratorium period, terms to pay back, and interest rate. Also, check whether the bank allows students to pay EMI in advance.
Check the expenses covered by the loan
Tuition fees are not the only expense you have to take care of while completing your course. There are other expenses which the loan must cover. Otherwise, managing those expenses amidst your expenses like foods, clothes, and the occasional need to request “write my essay” to online professional essay writers will be tough.
There are various loan schemes covering different types of expenses educational loan. Here is a list of expenses that the loan should cover:
- Cost expenditure of books, instruments, equipment
- Hostel rents (if you are opting for one)
- Travel expenses
- Building fund, caution deposit, refundable deposit,
- Purchase of laptop (if needed for the course)
- Examination, laboratory, library fee
- Insurance premium for the student (if applicable)
- Other expenses like thesis, study tours, camps, project work, etc.
The bank where you wish to apply for an education loan will need certain documents to ensure that you are a genuine candidate. The majority of document requirements are the same for most banks. Here is a list of the documents you need to submit:
- Photo ID proof
- Residence proof
- Completion of loan application form
- Two passport-sized photographs
Academic documents include:
- Reports of scores of TOEFL/IELTS/GRE/GMAT
- Progress reports
- Fee details
- Admission letter/CAS/Offer letter
- Income tax return for the last two years
- Salary slips of last three months
Read the terms and conditions properly
“You must read the terms and conditions of the educational loan to be aware of all associated charges like charges involved in prepayment or late payment of EMI, processing fees“, says Andy Diaz, career counselor and online essay writer. These terms and conditions might not be conveyed during the loan disbursal. If you do not want to be taken by surprise, make sure you check everything.
Choose your institution carefully
Choosing the right institution will make all the difference. You might end up selecting a university for having a good name, but if it lacks a good placement strategy, you will be at a disadvantage. Also, ensure if the university you are choosing has been blacklisted or not. Otherwise, it will only be a waste of time and money. These universities tend to accept students without checking their academic credentials because they only look for making money for the high fees they are charging.
Always have a backup plan
You must know the consequences before taking a higher education loan. If you fail to repay the loan by any chance, it will hamper your future credit opportunities. The collateral offered will also be at stake and risk the guarantors. This is why it is essential to have a backup plan for repayment if you fail to get a job after the moratorium period.
Wrapping it up:
You must be aware of the implications of high education loan before applying for it. You need to be prepared for the best and the worst-case scenarios. The last thing you would want is to be in a debt trap. Keeping the above points in mind will help you manage your educational loan without having to bear much of the burden.