Using Student Loans to Cover Part of Your Tuition Costs? Borrow Wisely to Avoid Drowning in Debt Later

Aug 03, 2009, 05:12 ET from SimpleTuition, Inc.


NEWTON, Mass., Aug. 3 /PRNewswire/ -- Tuition bills for fall semester have begun arriving in mailboxes, and the scramble to figure out how to pay them is underway. For most families, student and parent loans are a reality when it comes to covering the tuition bill.


But while borrowing may be a necessity, it shouldn't be an indulgence, warn experts at SimpleTuition, Inc., the leading student loan comparison site for personalized student loan research. With the average graduate amassing almost $20,000 in student loan debt - plus another $4,100 in credit card debt - upon graduation, concerns over how to conscientiously cover the costs of college are at an all-time high.


It's possible to keep borrowing to a minimum, says SimpleTuition. Students and parents should consider the following:


  • Know the Bottom Line in Monthly Payments. Decode the tuition bill to determine what you'll owe after aid and grants, then divide up the balance by where the money is coming from: current income, savings, student job and/or work study, and borrowing federal or private student loans. Once you know what to borrow, resources like show what you'll owe on a monthly basis down the road, as well as the overall amount you'll repay. By seeing the monthly impact, you're less likely to "round up" to a larger figure and over-borrow.


  • Pay Interest During the School Year. Few borrowers realize it, but if you defer your student loans while you're in school, you're likely accumulating interest (exception: "subsidized" federal student loans). This interest will ultimately be added to the original principal amount. Pay the interest during the school year, and you can lower the overall cost of borrowing dramatically. Plus, paying during the school year also gets you in the habit of paying loans. That way, you'll learn to apply discipline as a borrower from Day One.


  • Use Only One Low-Limit Credit Card for Expenses. If possible, cut out credit cards completely, and certainly don't rely on them for extras like entertainment and spring break. If you must use a credit card for some purchases, use a low-limit, low interest rate credit card to cover these needs. Then, pay it off at the end of each academic year with earnings from a summer job. Do not take out more than one credit card. Make it a point to not carry a credit card balance at all, and definitely don't carry a balance from school year to school year, as the balance will pile up fast and weigh you down just as graduation approaches.


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SOURCE SimpleTuition, Inc.