Alright, so I know for most of you out there, school is not starting for another two to three months. BUT, right about now is when lenders will be sending out their financial aid information and you (and/or your parents) will be signing those MPN’s for financial aid. And as someone who has gone through that process, it’s always a little stressful and incredibly confusing the first time you go through it. In the past I took out too much in student loans and instead of being responsible and using it for the following year or using it to pay off said loans, I spent it! I know, it’s a horrible thing to admit, but I did, which is probably partially why I write this blog now. So here are some steps that may make the process easier and can possibly help you save money down the road by planning ahead.
1. Make a budget for the year.
At this point you should roughly know what rent/dorming will cost you for the year, and you may be able to make a rough estimate of your other living costs for the year (food, textbooks, parking, so on). Also, add in money you may receive as a grant or scholarship. Write all of this down, and absolutely allow yourself a tiny cushion in case of major car troubles, roommate troubles, or any other unknown thing that might cost you a couple hundred bucks. Decide if you want to work part- or full-time while in school and add that into your budget. At this point you should have a rough idea of what your costs will be for the year and then take out however much money you need based on those amounts.
However a word of caution. If your university/school has been repeatedly increasing the cost of tuition, you may want to speak with the financial aid office about this and ask if they will raise the cost after the fall semester/quarter (and in the following years). In California, this routinely happened at several state colleges during the Great Recession and hardly a semester went by where the tuition didn’t increase by at least ten or fifteen percent each semester.
2. Read through what the loan says. Write down all your questions.
Like pretty much everything these days, the important information gets tucked away in the fine print and legal jargon. Student loan lenders base their livelihoods off the fact that most people hate reading this information and just want to get the process over with. In order to avoid some of the sting student loans can later bring you, read through as much of the jargon as you can manage and write down each and every important point or question you might have. Does the interest rate seem high? Write it down. Does it allow you to pay off the accrued interest while still in school? Write it down.
Take all your notes and proceed to Step 3.
3. Talk to the financial aid office.
I’m not sure how it is now, but during my time in college (right before, during, and after the Great Recession), the financial aid office was a place you went to if you wanted to get sneered at by Debbie for asking stupid questions (sorry out there to all other Debbie’s). Perhaps now it is a place of help and grant opportunities, I hope.
Anyways, take all your questions from Step 2 and ask away. They are paid to help you understand this stuff and you have every right to stay there until you feel like you understand how your loans will work. Take notes, ask follow up questions, and even schedule a meeting with someone there if you need to. See if there are other lenders out there that may have lower interest rates. And always ask what scholarships or grants they have that you may be able to apply to. Even if it’s a hundred bucks, that’s still like one half of a textbook (unless you’re an engineer).
4. Decide how much to take out and then sleep on it.
Now that you are armed with knowledge, write out how much money in student loans you will be taking out for the year. Then sleep on it. Let the numbers sit in your subconscious, working around while you re-watch World War Z on Netflix. The next morning you may decide you need to take out more or less based on some cogitating you did while watching Brad Pitt and his glorious hair.
5. Now sign away your soul/future first born.
Now, yes now, you may sign away. You have thought about it long and hard, did your research, and asked all the questions you could think of. And by taking the time to plan out such an extensive budget, you will also gain a greater understanding of what living expenses cost for you.
Student loans are probably one of the most stressful non-academic thing in a student’s life, but like any monster, the way to conquer them is by understanding them. By taking the time to understand how they work before you accept the money, you can avoid mountains of debt problems later.
Water & Parchment 