Sleazy Student Loans?

As a student or parent of a student, you may not see student loans as anything more than a great resource for obtaining a college education. Don’t be fooled though, student loans are big business, especially for private lenders. Over the past decade, there’s been an explosion of private student loan lenders in the United States, promising large loans for students that can’t get federal aid or need extra money for school. Therein lays the problem - unlike federal lenders, private student loan lenders set very few limits as to how much students can borrow. Young and naïve students end up borrowing more than they can handle and get buried by the high interest rates. When students can’t pay their debts, the lenders take an aggressive stance, using scare tactics usually reserved for collections agencies to get their money back. Don’t let yourself or your children fall victim to these sleazy student loan lenders, follow these tips for safely borrowing loans.

How to Safely Borrow

• The general rule of thumb for student loans is to borrow less than what you expect to earn in your first year on the job. Unless you know you’ll make significantly more money in a couple years, this rule will keep you from getting overwhelmed by debt.
• Aren’t exactly sure if college is right for you? Don’t take out a significant student loan if you’re still unsure about what you want to do in your life. Try attending a couple semesters at a community college first, that way you can decide if school is for you, without putting yourself in debt.
• Before you even think about applying for a private student loan, make sure you’ve tried all of your options in federal student loans. They’re almost always significantly less expensive than private student loans and there are even programs where your parents can help.
• If you must borrow from a private lender, do it with caution and watch out for any hidden fees. Look for well known lenders that have a proven track record among students. When possible, apply for your loan with a co-signer as you’ll likely get a much better interest rate.

Additional Resources:

• Five Charged With $690,000 in Student Loan Fraud
• Help! I’m drowning in student loans