The Lowdown on Student Loans: What You Need to Know Before, During, and After Study

Today, over 44 million Americans are walking around with a total of $1.5 trillion in student-loan debt. 

Metaphors aside, about seven in 10 Americans graduate with significant student loan debt. Borrowers now graduate with an average of $37,172 in loans. The result is a burden that remains with some people for the rest of their lives. A study by Nerdwallet, found the retirement age for the class of 2018 is pushed back to 72, in part because of accumulated loans.      

Taking out a student loan can be intimidating, but knowledge is power. What do you need to know about student loans, before you take them out, while you’re studying, or after leaving school? Read on for the answers.

Before Applying
 

Research your options. 
Look into both public and private options for your student loan. Public loans, offered by the federal government, offer the advantages of fixed interest rates, greater flexibility in repayment options, and, in some cases, subsidies that partially defer interest until you’re out of school. Private loans, offered by banks, credit unions, state loan programs, and educational institutions themselves, could allow you to qualify for a higher amount – and with good credit, a lower interest rate.

Don’t borrow more than necessary. 
It may look easy to apply for a higher amount at the outset, but remember that every dollar borrowed is a dollar to be paid back – with interest. By budgeting your expenses carefully before starting school, you will be able to limit your loan to only the amount that you need. 

Explore other financing options. 
These include grants, scholarships, and work-study options that could defray – or in the best cases, wipe out – your debt. And remember,: scholarships and grants are not only something to investigate when you’re first applying for college, but can also be awarded on a rolling basis for reasons such as strong academic performance or altered financial need.

While Studying
 

Spend your loan wisely. 
This one may sound obvious, but since we’ve heard horror stories of students using their loan money to take a trip to Cancun, we thought we’d offer a gentle reminder: DON’T DO IT. Getting a loan puts instant money in your pocket, and the temptation to spend it can be strong. Wasting it on non-academic pursuits is a big mistake, putting you in the unenviable position of having to request a second loan to pay back the first.

Start paying it back. 
A small monthly payment while you’re still in school can give you a head start on your future. Since paying it off quickly means less interest accrued, more of your payment will go toward bringing down your principal. In short, those little payments will go a long way. 

Prepare for the future. 
There’s no worse way to join the workforce than with a monthly loan repayment that’s higher than you expected. Through careful planning –researching the salaries in your field or using a loan payment calculator, for instance – you’ll have an understanding of future payments and can avoid sticker shock.

After Graduating

Check out loan forgiveness options.
Through the Public Service Loan Forgiveness Program, the balance of a student loan could be forgiven after 120 payments for those working for federal, state, local, or tribal governments (including volunteer programs like Americorps or the Peace Corps), or a tax-exempt nonprofit organization.

Refinance or change your payment plan.
Pay attention to fluctuating interest rates, as refinancing a private loan with a lower interest rate can reduce your monthly payments. If you had a cosigner for your original loan, refinancing with a new loan could also be a way to remove their obligation to you. For federal loans, you can choose among a number of repayment plans, including standard, graduated, pay-as-you-earn, and income-based options. Note: refinancing is not an option for federal loans.

At the end of the day, student loans are simply a financial tool, and they don’t have to be scary. With some prudent planning and wise spending, you’ll not only be building your credit for future expenses like a car or mortgage, but most importantly, you’ll be making a great investment – in your own education.

Did you know? Most student loans have a six-month grace period once you graduate to give you a chance to begin earning an income. 

Past, present or future student? We are committed to empowering Students both past and present make the right financial decisions. We want students to focus on what really matters, your studies! We have curated learning modules to help save you both time and money when managing your finances.

Written by Everfi Inc working in partnership with HSBC Bank USA, N.A. The view and opinions expressed in the article are those of Everfi Inc. and do not necessarily reflect the views and opinions of HSBC.

HSBC offers the Modules for educational purposes only and they should not be considered professional or investment advice. While HSBC is pleased to offer the Modules as an educational service to our customers, HSBC does not guarantee, warrant or recommend the opinion or advice or the product and/or services offered or mentioned in these Modules. Any opinions, judgments, advice, statements, services, offers or other information presented within a Modules are those of a third party and not HSBC. For a comprehensive review of your personal finances, always consult with a tax or legal advisor. Neither HSBC, nor any of its representatives may give legal or tax advice.

HSBC does not guarantee the accuracy of the translations of modules provided in a language other than English that maybe provided. If you decide to open an account with HSBC, please be advised that documents related to your accounts will only be available in English and services provided may also only be in English.

For your convenience, HSBC may establish links within these Modules to one or more other websites or blog posts independently operated by third parties. HSBC has no control, oversight or responsibility over any such other websites or contents therein. The existence of any such links shall not constitute a warranty or an endorsement by HSBC of such website, the contents of the websites or the operators of the websites. You access them entirely at your own risk.

HSBC refers to HSBC Bank USA, N.A., HSBC Securities (USA) Inc. and HSBC Insurance Agency (USA) Inc. HSBC Bank USA, N.A. provides banking products and services. HSBC Securities (USA) Inc. provides investment products and services and is an affiliate of HSBC Bank USA, N.A. HSBC Insurance Agency (USA) Inc. provides insurance products and services and is a wholly owned subsidiary of HSBC Bank USA, N.A.