Everyone has heard stories of people leaving their undergraduate degrees with tens of thousands of dollars in student debt. But faced with cost-of-living increases and rising tuition, many students are left wondering if it is worth taking out a loan to support their efforts of obtaining a college degree.
As a first-generation college student, I was totally in the dark about student loans when I first began studying at my university. Of course, I’d heard stories of people drowning in debt, but I’d never really heard any positive experiences with loans. As a student with the full responsibility to pay for my education, it was worrying to hear all of this negativity around taking out student loans.
If you are getting ready to go to college or are debating whether taking out a student loan is right for you, research your financial options to make the best decision for your situation. Here are several things to consider while researching your student loan options.
Consider Financial Aid Through the Government
The first thing to consider when paying for college is whether you qualify for subsidized loans, grants or other types of financial aid.
A good place to start is by filling out the Federal Application for Student Aid, or FAFSA. By filling out the FAFSA application, you are immediately considered for different types of federal aid to help support your college education. Depending on the financial situation of you or your family, you may be eligible for different types of financial aid.
The best type of financial support you can receive through FAFSA is financial aid that you do not have to pay back. This type of assistance comes in the form of grants or work-study compensation. Grants do not need to be paid back, unless you do not complete your degree or meet the terms outlined by your specific grant.
Work-study, on the other hand, involves working a job. Students who are eligible for work-study positions may be given priority when applying to campus jobs and will be awarded an amount based on their financial need, the school’s resources and the type of work they complete.
If you are not eligible for these types of financial awards through FAFSA, you may be eligible for a subsidized or unsubsidized loan.
- Unsubsidized loans: Will accrue interest during the time you are in college but will not require you to begin making payments until a period of time has passed after your graduation date.
- Subsidized loans: Do not accrue interest during the time you are in school, and only begin to accumulate interest once you have finished your education.
Understanding the difference between subsidized and unsubsidized loans is essential to knowing what your student debt circumstances could look like if you choose to take out a loan.
Research Financial Aid Through Your College or University
Other options to consider before looking to loans for financial aid are academic and need-based scholarships. Many universities offer scholarships to students with high academic achievement or demonstrated financial need.
Charlotte Saethre, a Zions Bancorporation software intern, suggests applying for scholarships can help students avoid taking out excess debt.
“Don't ever think you won't get a scholarship — apply anyway,” she says. “The best advice I got was to apply even if you don't think you will get it, because a lot of times that is what a lot of students think. And then no one applies, and you are the only one, so by default you get it! The more scholarships you receive, the less debt you will incur.”
Aside from scholarship opportunities through your university, it is worth noting that oftentimes community scholarships are available to students. Research local businesses, charities and organizations to find those offering scholarship opportunities. The more scholarships you are able to apply for, the more likely you are to find opportunities that align with your accomplishments and needs.
Think Twice About Private Loans
Another way to secure funding for college education-related expenses is to take out private student loans. As a new or prospective college student, you may have received mail or emails from organizations offering you different types of loans with varying interest rates. When considering taking out a loan for school, make sure you have a solid understanding of the terms of your loan.
Many private loans do not offer the same repayment plans as government loans do.
Loans awarded to you through FAFSA often have some flexibility in how you can pay the loan amounts back, depending on your financial situation and career after graduation. Private loans may not offer this same level of flexibility with repayment, and they will not be eligible for student loan forgiveness programs in the same way that FAFSA awarded loans are.
If You Do Take Out Student Loans, Only Take Out What You Need
One of the biggest lessons I’ve learned as a student who has taken out student loans is that you do not need to accept the entire amount offered to you by FAFSA. When you accept a loan through the government, you are able to return all or a portion of the loan, with no fees, within a certain number of days from the date that you originally accepted the loan.
The amount of money you borrow and the interest rate of your loan are both important in determining how much your loan payments will be after graduation. Only taking out what you need may help you avoid accruing large amounts of debt. This can help you maintain a manageable loan payment and make progress toward buying a home, saving for retirement or achieving other financial goals you may have.
Some students with loans may choose to start making payments while they are still in college. Making these periodic payments can help lower the total borrowing cost you will accumulate before you technically have to start making payments on the loan.
Another financial strategy in minimizing the amount of debt you accrue by taking out student loans is selecting a university in a city with a lower cost of living and a reasonable tuition rate. Zions Bancorporation financial crimes intern Chase Potter recommends this approach.
“Go someplace for your generals or associate degree where you can get it done cheap and complete it without being in debt,” he says.
Community colleges are a great place to start your general education requirements. Many students complete these credits at a lower-cost school, then transfer to a four-year university to earn credits in their specific area of study.
Invest in Yourself
Although taking out a student loan can feel like treading into unknown territory, choosing to achieve a higher level of education is an investment in yourself that will allow you to continue progressing in your career for years to come.
“Student loans can be daunting to think about, but nothing is more important than investing in yourself,” says Terra Leonardson, a Zions Bancorporation internal audit intern.
So, when deciding whether taking out a student loan is right for you, be strategic, and consider the financial resources available to you to fund your education.
Learn more about the financial aid available through FAFSA, and go to your university’s office of scholarships and financial aid for more information on the support they offer.
Zions Bank can be a resource as you manage your personal finances. Visit a Zions Bank branch near you to speak with one of our experienced bankers.
Marlie Hansen is Zions Bank’s Corporate Marketing and Communications summer intern, and is a junior in communications at the University of Utah.
