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Student Loans 101

Thinking about getting a student loan to finance your college education? For many young adults, student loans serve as the first real experience with borrowing a large amount of money. This can be a steep learning curve for someone just starting out.

Saving for college ahead of time is, of course, preferable to taking on considerable debt. But if you must borrow, we want you to borrow the smart way and think of it as a process of using a collection of savings, institutional aid, free money, and—if necessary—loans.

We’ve gathered some tips to help clear up questions about funding your higher education.

Understand your financial aid package.

Most people think financial aid equals grants and scholarships – or free help – but student loans are also part of the package. They technically serve as help to pay for school, although they must be paid back after graduation. When you receive your financial aid package from each school, don’t assume that everything listed is grants or scholarships. Carefully review each item and call your school’s financial aid office with any questions.

Federal student loans aren’t created equal.

Federal loans fall into two categories: subsidized and unsubsidized. Subsidized student loans are reserved for students that have financial aid, and the federal government pays the interest while you’re in school. Unsubsidized student loans are available to all students, regardless of financial need. However, students are responsible for paying all interest on the loans. To be eligible for both loan options, students and their families must submit a FAFSA.

Don’t over-borrow.

It may sound like common sense but it can be tempting to borrow just a little extra. Here’s a good rule: don’t borrow more than your starting annual salary. Research potential careers and their salaries with salary.com and use that data to set a limit for borrowing. To figure out how much money you may need to borrow, look at a college’s cost, your cost of living, your family’s contribution and your financial aid award. You don’t have to accept the entire amount of a loan you’re offered.

Check into other sources of funding.

Though you may be awarded federal student loans in your financial aid package, they still might not cover the total cost of attendance. Oklahoma Central Credit Union has partnered with Student Choice to offer a private loan solution that is designed to fill the funding gaps that may exist after all lower-cost sources of aid have been exhausted.

Understand what you are signing.

To make sure you understand a loan’s terms, conditions and repayment requirements, ask your financial aid officers questions like:

  • How much will this loan cost in total?
  • What will my monthly payments be?
  • Is the interest rate fixed or variable?
  • Can I get a lower interest rate?
  • What fees do I have to pay?

No need to pay immediately after graduation.

Thankfully, you’ll have some time to enjoy being free of finals and midterms before having to make that first student loan payment. You’ll get a six-month grace period during which no payments need to be made. This allow you time to find employment before you must take on monthly loan payments.

There is such a thing as student loan forgiveness.

Student loans can be forgiven – but you must meet quite a few requirements. Forgiveness requires that you have a job serving in the public sector with government organizations, not-for-profits and other types of qualifying public services like law enforcement, teaching and military service.
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