Scoop on Savings – Dodging high interest rates on college loans
EL PASO, Texas —
We’re only a few weeks away from the start of the new school year, and that means a lot of students are pulling out loans.
College loans have to be repaid with interest, so it’s important for incoming students to look over the terms and conditions of their loans.
I spoke to New Mexico State University financial aid director Vandeen McKenzie, who said the most proactive thing a student can do is complete a free application for federal student aid form, otherwise known as FAFSA.
A student’s eligibility for a federal direct student loan is done through the a FAFSA form.
McKenzie says federal student loans normally have the lowest interest rates, along with additional benefits when the student enters repayment.
Students may also be eligible for either a subsidized or unsubsidized loan.
According to McKenzie, with a subsidized loan, the government pays the interest while the student is in school.
With an unsubsidized loan, interest is accrued while the student is in school. In most cases, a subsidized loan is the better option.
Students and parents should also remember some of the repayment benefits students may be eligible for after finishing school. That can be either deferment, forbearance, or even loan forgiveness.
McKenzie also had these tips for students to consider when applying for student loans:
1 – What is the actual cost of attending? Meaning tuition, housing, meals and books.
2 – How much of their actual cost is not covered by grants and scholarships?
3 – Are there any other options to assist with paying for college costs, not covered by grants and scholarships?
4 – After all options have been reviewed, borrow only the amount needed to cover the outstanding cost.
Remember, private loans will have their own interest rates set by the specific lender.