The bad economy in Eastern New Mexico means that many more students will be taking out student loans this year. Unfortunately, government cutback to loan programs means that there will be less federal loan money available. For a lot of students, taking out private student loans is the only other viable option.
Before deciding on which school to attend, it is important for students to review their financial aid package and consider the student loans which have been offered to them. If grants and government loans still leave you short, however, it may be time to consider student loans. Sallie Mae is one of the largest providers of student loans to American college students.
According to federal rules, student loan money can only be used to pay for tuition and other expenses directly related to the costs of attending school. Expenses such as textbooks, room and board, and even uniforms can be paid for with student loans. Indirect expenses, however, such as transportation are not allowed. Students who need help with their indirect expenses should use their grant money or other income to pay for these costs, and use their student loan money to pay for direct school costs.
When taking out student loans, it is important to make sure that it makes sense financially for you to do so. As a general rule, try not to borrow more than your expected salary for one year after you graduate. This will keep your payments affordable. Remember that student loans offered by Sallie Mae are not necessarily subject to the new federal rules regarding government backed student loans. This means that it is especially important to pay attention to your loan terms.
When reviewing your loan terms, note the origination fees and interest rate being charged. Since students can only refinance their student loans once, it is especially important to pay attention to the type and amount of interest that is being charged, as well as the payback period of the loan. Sallie Mae loans are typically required to be repaid within ten or twenty years after graduation. This term can be extended for certain types of loans, however. For example, Sallie Mae offers loans for graduate and professional schools (for fields such as medicine and law) which can be repaid over thirty years.
The interest rates on these loans are usually higher than those subsidized by the government, but are generally lower than paying for tuition with a credit card or HELOC. It is important to note whether or not the interest will be deferred while you are in school. Some Sallie Mae loans will start charging interest on the principle immediately, and some of these loans will require payments of this interest while the student is still in school. Other loans will add the interest that accumulates to the total principle, but the student is not required to make payments while he or she is still a full-time student. The student can choose to make payments in order to lower the total amount of interest that accumulates, however. Sallie Mae typically does not offer private loans in which no interest is charged while the student is in school.
After graduation, the (now former) student will be required to start making payments. Most Sallie Mae loans have a six month grace period which starts the day of a student’s graduation. During this grace period, interest accumulates on the loan, but payments are not required. Depending on the loan, however, there may be no grace period or this time might be extended up to one year. When researching student loans, be sure to review your employment prospects and consider the grace period, as well as the other loan terms, before agreeing to take out a student loan.