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JUNE 2018
Five Steps to Take Before Borrowing a Student Loan
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Many students have to borrow in order to pay for college. To keep borrowing under control, here are a few things you should know and steps you can take
before
you borrow.
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1. Exhaust All Other Funding Options.
Have you completed the
Free Application for Federal Student Aid (FAFSA)
and
finished the financial aid process
at your school? Have you received your award letter? Have you applied for outside scholarships? Have you talked with a financial aid counselor to ensure that you've accessed all of the financial aid available to you? Have you explored using a tuition payment plan? If not, these are important first steps to ensure that you are maximizing all other options before you borrow. It’s also important to remember that applying for financial aid is an annual process - you need to apply on time
every
year.
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2. Reduce Your Expenses.
Believe it or not, there are many college-related costs that you can control. Do you have a roommate? Can adjust your meal plan? If you do have a meal plan, remember that purchases outside your plan, like daily coffees and eating at restaurants (including fast food), can be real budget busters. You should also consider whether you really need a car on campus. Leaving your car at home can cut insurance costs and save you parking expenses. Don’t forget to take advantage of free entertainment on campus, like movie nights and other campus events, instead of paying to go out. Check
here
for more ideas to reduce college costs.
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3. Research Your Future Salary.
Before you borrow, it's critical that you fully understand the return on your investment, and that includes understanding your future salary. Visit
CareerOneStop
for information about annual
wages by state, employment trends, skills needed, and much, much more.
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4. Use FAME's Debt/Salary Calculator.
Once you’ve researched future earnings, the next step is to determine the maximum amount you should borrow based on your salary. Generally speaking, your student loan payment should represent no more than 8-10% of your monthly income. Keep in mind that your student loan payment will be about $100 per month for every $10,000 you borrow. Another rule of thumb is that the total amount you borrow should not exceed your annual salary in your first year of employment. To learn more, visit
FAME’s interactive student loan debt/salary calculator
to determine how much you should borrow based on future earnings.
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5. Understand Your Student Loan Options.
Most students have to borrow to pay for college. Since
federal student loans
have many benefits, including flexible repayment options, they typically should be considered first. Some families also choose to take out private education loans or borrow against the equity in their home. To assist you in becoming an informed borrower, FAME has developed
TheLoanforME.com
.
This website provides tools and information to help Maine students and families learn about student loan options, and includes a list of local private student loans and lenders.
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Join us for this month's
FREE
Wednesday Webinar:
Resources to Help Families Make Informed Decisions About Paying the Remaining Balance
Wednesday, June 13 • 10:00–11:00 a.m.
Are you confused about the various financing options available to help families cover the remaining cost of higher education? Are you looking for resources to help your students and families become informed borrowers? If so, this is the webinar for you! During this webinar, we'll feature several new resources available through FAME that were created to help Maine students as they consider various higher education financing options, including student loans.
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FAME's College Access and Financial Education Team:
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The Finance Authority of Maine (FAME) does not discriminate in the administration of any of its programs or in its employment practices on the basis of race, color, national origin, age, gender, religion, physical or mental disability, political affiliation, marital status or sexual orientation. FAME is an equal opportunity employer, provider and lender.
FAME provides links to other websites as a convenience and does not endorse or guarantee the content, accuracy or usability of such sites.
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