Even with student debt forgiveness, it’s better to borrow responsibly – Chicago Tribune
For those new to the college loan process, thoroughly explore financing options, know the rules, and spend wisely. This advice comes from student financial aid and financial planning professionals. I reached out to them following President Biden’s executive order forgiving federal college student loans that millions of borrowers are struggling to pay.
Resist “the temptation to borrow as much as you can,” said Matt Zarris, associate director of the Office of Financial Aid at Governors State University. He thinks that’s part of the reason there’s more than $1.7 trillion in student loan debt.
If you need to borrow, borrow only what you need and research grants, scholarships and other college funding opportunities first, advisers say.
Be sure to borrow responsibly and spend wisely, Zarris pointed out.
“When we speak to students at orientation events and at financial aid open houses, we always want to make it clear that financial aid is for education expenses,” he said. .
This includes tuition, fees, books, on-campus housing and meal plans, transportation for commuting students, and help with utilities and rent, Zarris said.
Anthony Harris, financial adviser and owner of The Harris Group Wealth Management, based in Orland Park, recommends that students who are considering going to college first complete the free application form for federal student aid, known as the name of FASFA, even if they do not think they will be eligible. for federal loan assistance.
“People may not believe they will be eligible for financial aid, so they won’t bother filling out the FASFA, which is necessary not only to qualify for federal financial aid, but also to help with federal programs. studies and grants. Bypassing that and going straight into the private lending environment is one of the mistakes people make.
The FAFSA form allows students to apply for federal scholarships, work-study programs, and loans in one application. From October 1, students can apply for the 2023/2024 school year.
Harris said to learn more about scholarship and grant opportunities, high school students shouldn’t neglect meeting with their guidance counselors.
This school year, under the Federal Pell Grant program, grants of up to $6,895, open to students enrolled in an undergraduate course in the United States and from low-income families, help students cover the cost of their education, as well as the $7,200 grants from Illinois. Monetary reward program.
“Right off the bat, it’s $14,000 that students can receive if they qualify for the full amount of Pell and MAP,” Zarris said. It is free money that covers a good part of the tuition fees.
Grant ceilings may change each year.
Those who need to take out loans need to be aware of interest rates and if they’re fixed or variable, and if they’re variable, what’s the range, Harris said, warning “if rates go up and you are in a variable rate loan, this could be problematic.
Potential borrowers should also know:
· When loan repayments begin.
· Whether the loan can be repaid while they are in school.
· What is the penalty if you are late on payments.
· Who services the loan.
· If you choose a private lender, is the company reputable.
“Make sure you’re borrowing federal loans first,” Zarris said. “There are opportunities for private loans, but private loans will most often carry higher interest rates.”
He added that federal loans also have better repayment options than private loans.
“Federal student loans have repayment options such as income-based repayment plans or income-based repayment plans where they consider a lot of information like how much you borrowed, how much you earn,” did he declare. “If you’re married, they’re going to look at your spouse’s student loan debt. If you have a family, they’ll look at your household size.
These variables will be taken into consideration in determining the monthly federal student loan payment. Private lenders do not consider these variables, he said.
Zarris and Harris also advised potential borrowers to consider the type of degree they seek, available jobs, and salaries in desired fields, and take these into consideration when deciding how much student loan debt to take. to contract.
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Consider, if you can realistically afford to repay the loan, what impact that will have on your budget, what those monthly payments look like, and what the impact is on cash flow, Harris said.
“People are really surprised when the refund switch is on and it’s not built into their budget, so that’s one of the biggest mistakes,” Harris said.
Student loans shouldn’t be viewed negatively, Zarris said.
“They are part of the financial aid equation,” he said. “They are there to help bridge the gap. If a student is not eligible for enough grants and scholarships, student loans will definitely help students to cross the finish line. That’s really the end goal, to cross the finish line, earn that degree, and pursue a career where you’re able to support yourself and your family.
But, he warned, if you don’t make it to the finish line, “unfortunately there isn’t much return on that investment.”
For more information about federal student aid, contact the federal Department of Education at studentaid.gov.
Francine Knowles is a freelance columnist for the Daily Southtown