Fastweb’s Financial Aid Guru Mark Kantrowitz has compiled his top tips on repaying student loans, saving money and alternatives to student loans. Any wise student will heed this advice!
Repaying Student Loans
• Sign up for auto-debit with electronic billing, where the monthly loan payments are automatically debited from your bank account. Many education lenders offer a 0.25% or 0.50% interest rate reduction for this.
• Accelerate repayment of high interest debt first. After you make the required payments on all your debts, make an extra payment on the loan with the highest after-tax interest rate. Usually this is credit card debt or private student loans.
Smart Borrowing
• Do not borrow more than your expected starting salary for your entire education. If you borrow more, you will have to use an alternate repayment plan like income-based repayment or extended repayment to afford the monthly loan payments. If you borrow more than twice your starting salary you will be at high risk of default.
• If you find yourself needing to borrow more than $10,000 per year of education, you are probably overborrowing and should consider switching to a less expensive college.
Financial Aid
• Apply for financial aid even if you think you won’t qualify or even if you didn’t qualify last year. The need analysis formulas are complicated enough that it is difficult to predict whether you will qualify. Moreover, the Free Application for Federal Student Aid (FAFSA) is a prerequisite for the unsubsidized Stafford and PLUS loans, which do not depend on financial need. An estimated 2.3 million students would have qualified for the Pell Grant in 2007-08 but did not submit the FAFSA, and 1.1 million of them would have qualified for a full Pell Grant. (Two-fifths of students do not submit the FAFSA and about a quarter of these would have qualified for the Pell Grant.)
• Submit the FAFSA as soon as possible after January 1. The FAFSA is used for state grants and college grants in addition to federal student aid, and some states and colleges have very early deadlines.
Making and Handling Money
• Work part-time while you are in school. Even if you don’t qualify for Federal Work-Study, there are plenty of part-time jobs on or near college campuses. Working 10-15 hours a week will help improve your grades by forcing you to learn time management skills. Working a full-time job will hurt your performance by taking away time from academics. Enroll full-time and work part-time, not vice versa.
• Try to minimize credit card debt. Do not charge more than you can afford to pay off in full each month. Beware that spending $500 with plastic feels the same as spending $5, so it is hard to exercise restraint.
For more tips like these and expert advice visit http://www.fastweb.com/financial-aid/articles/2613-kantros-tips-to-save-you-money.