Top 5 things you need to know about your Student or Financial Aid Account

Here are 5 tips on ways to reduce the need to borrow for college costs and cut your overall cost of education.

1. Borrow federal first: Federal student loans are cheaper, more available and have better repayment terms than private student loans. The interest rates on federal education loans are fixed, while the interest rates on most private student loans are variable and will probably increase over the life of the loan.

2. Before buying something with student loan money, ask yourself whether you would still buy it at twice the price: Every dollar you spend will cost you about two dollars by the time you pay back the loan, given typical interest rates and repayment terms. Suddenly, that $10 pizza doesn’t seem as attractive at $20. Plus, spending $10 a week on food or entertainment will cost you $2,000 by the time you graduate. The $4 daily specialized coffees or juice drinks add up to $4,000 over 4 years.

3. Pay the interest on unsubsidized loans during the in-school
and grace periods to prevent the loan balance from growing larger:
Most student loans allow borrowers to defer repaying the loans during the in-school and grace periods. If the borrower does not pay the interest at it accrues, the interest is capitalized (added to the loan balance). This is a form of negative amortization. It can increase the loan balance by 15% to 20% by the time the borrower enters repayment. Both federal and private student loans do not have prepayment penalties, so nothing prevents you from paying the interest during the in-school period.

4. Graduate with a Bachelor’s degree in four years, not five or six: Graduating on time (or early) can save you an extra year or two of college costs. Take a full course load or even an extra class if you can handle it. Map out your path to your degree, to ensure that you take the prerequisites as soon as possible.

5. Ask for your quarterly excess funds to be returned to the loan lender or keep a credit on your account: Each quarter any excess aid not needed to cover your tuition, books, or fees would be sent out to you by check.  If you would rather have these funds returned to your lender, all you need to do is contact your Financial Aid Administrator and let them know in writing of that request.  This process works with both Federal Direct Loans and Private Alternative Loans.  In addition to returning the money, you can also choose to carry over a credit balance to a future quarter to cover your costs.  The process is the same – just notify your Financial Aid Administrator!