Avoiding College Loan Debt

College students can agree on a number of negative aspects of university life. Students may complain about the inordinate amount of school work they face, threatening the time usually devoted to such crucial activities as playing video games, going out and facebook “research.” Other top concerns may include the pesky weight gain associated with 2 am pizza runs and the crippling inability to do one’s own laundry.

These concerns, however, appear insignificant when compared to more serious financial issues that attending college may raise. In a time when tuition rates have risen 35% in the past five years, many students and their families find that they have drained their college savings (if they had any to begin with) and must rely on seeking an alternative method of payment: the student loan.

According to the 2003-2004 National Postsecondary Student Aid Study (NPSAS), two thirds of 4-year undergraduate students will graduate with some debt with an average of $19, 237. If one decides to attend graduate or professional school, the additional debt can range between $27,000 to $114,000. For a recent graduate entering the workforce, the payments on such balances can seem daunting.

Fortunately, there are some ways to ensure that you are choosing the smartest route when financing your education. The following tips can help you become more knowledgeable about student loans and best practices:

1) Fill out the FAFSA: The Free Application for Federal Student Aid Form (FAFSA), is instrumental in figuring out whether you and your family qualify for financial assistance. Using financial information regarding a student and his/her family, this document determines the expected contribution of a family and whether or not they qualify for federal assistance. Many colleges also use the FAFSA to determine any non-federal aid they may award a student.

2) Opt for Federal first: Acquiring federal loans may be your best bet loan-wise. Interest rates do not change and are not affected by your credit score. They also come with guaranteed borrower protections that can assist you during unemployment or financial strife. With Perkins and Subsidized Stafford loans, the governments pays your interest while you’re in school. Perkins loans offer interest rates at 5% (fixed) and Subsidized Stafford loans offer interest rates at no more than 6.8%. Unsubsidized Stafford loans are another option that do not cover your interest while you attend school, but do retain federal borrower protections and a fixed rate of no more than 6.8%.

3) Shop around for private lenders: If your family’s contribution and any federal aid fail to make the cut when paying for tuition, you may have to use private loans to cover the rest of the cost. According to Lynnette Khalfani, personal finance expert, it is imperative for students and their families to search for lenders that offer few or no loan origination fees and lower interest rates.