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However, borrowing thousands of dollars can have significant financial implications that extend far beyond graduation.
There are factors you should always consider before committing to student loans.
Before you commit, its crucial to carefully consider the terms and potential consequences of student loans.
Here are eightquestions to consider before taking out student loans.
Should I Pursue Federal or Private Loans?
There are two primary sources of student loans: federal and private.
Federal loans, such as direct subsidized and unsubsidized loans, are provided by the U.S. Department of Education.
These loans typically offer more favorable terms, including lower interest rates and flexible repayment options.
Private loans are issued by banks, credit unions and other lenders, often with less advantageous conditions.
What Are the Policies Surrounding Student Loans?
Ultimately, its important for anyone considering taking out student loans to be informed about the policies surrounding them.
How Are Interest Rates Looking?
Interest rates can significantly impact the total cost of a loan.
Borrowers should carefully review the interest rates and terms before selecting a loan.
Johnson advised watching for the impact of Trumps election in this area too.
Interest rates are certainly a major consideration in someone considering student loans, Johnson said.
What Are the Repayment Terms?
Federal loans offermultiple repayment plans, including income-driven options that adjust monthly payments based on income and family size.
Private loans often have less flexible repayment terms, which can lead to financial strain.
Are There Fees Associated With the Loans?
Many student loans come with origination fees,late payment feesor other charges.
These additional costs can add up quickly, increasing the overall debt burden.
What Are the Borrowing Limits on the Loans?
Private loans may have higher borrowing limits, but this can lead toover-borrowing and increased debt.
What Kind of Shape Is My Credit In?
Private lenders typically require a credit check, which can impact the interest rate and approval.
How Might the Loans Impact My Credit Score?
Because student loans are part of a credit report, they can impact credit scores in multiple ways.
Missed payments or high debt-to-income ratios can negatively impact credit scores, affectingfuture financial opportunities.
Teaching students financial literacy earlier is key.
Teaching financial literacy in college is simply too late, he explained.
By that time, many students have sealed their long-term fate by incurring burdensome student loans.
And this education need not be extensive.
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