The latest statistics say that there’s around $1.5 trillion of student debt in the US, making student loans the second biggest source of consumer debt, trailing just behind home mortgages. In short, a lot of students and graduates owe a lot of money, and there are so many common mistakes people make that lead to them paying more than necessary or having to deal with debt longer than they really should. With that in mind, let’s take a look at some common student loan mistakes for you to avoid in order to save yourself time, money, and peace of mind.
Failing to Compare Offers
This is arguably the most important mistake you want to avoid when looking for student loans or student loan refinancing. Don’t just dive right in and sign on the dotted line with the first lender you find or the one that all your friends are using. It’s much wiser to take the time, shop around, compare your options, and see which company is ready to offer you the best possible rates. Often, just a few hours spent comparing choices and reading reviews can save you huge amounts of cash.
Using Student Loans for Vacations and Shopping
Student loans are designed to cover the costs of your education, not your entertainment. Too many students rely on their loan money to pay for vacations, trips to the bar, parties with friends, shopping trips, and more, suddenly finding their debt spiraling out of control. It’s very tempting to give in and use the money for fun things, but if you do so, you’ll find your financial situation can quickly start to get out of hand. In order to avoid this issue, try to set yourself a budget, control your money, and only use loan cash for educational purposes like books and tuition fees.
Borrowing Too Much
One of the most common student loan mistakes people make is simply borrowing too much. A lot of students tend to think that they should go all the way to the limit when borrowing money for student loans, but this isn’t always necessary. Don’t forget that the financial aid refund still needs to be paid back. None of that money is ‘free’, so the more you borrow, the more you’ll pay back in the end, and thanks to interest rates, every dollar borrowed can quickly turn into two dollars or more.
Having A Cosigner Without Understanding What It Entails
A lot of students decide to get a cosigner on their loan in order to help the application process go more smoothly and maybe even get a better rate. That’s all well and good, but if you don’t understand what a cosigner actually is, you could find yourself in a lot of trouble in future. A cosigner is basically a co-borrower. They’ll have to pay off the debt if you can’t. Plus, if you miss payments, their credit score can take a hit too, so both you and your cosigner need to know the risks before going in.