After you determine your budget, decide what you can pay from savings (if any), and take your scholarships and grants into consideration, you might still need additional income. Each term or year, you should decide how much you can work while maintaining good grades and how much you should borrow from student loans.
Paid employment while you are in college can be important for reasons other than money. Having a job in a field related to your major can help you develop a credential for graduate school and make you more employable later because it shows that you have the capability to manage several priorities at the same time. Work can help you determine whether a career is what you will really want after you complete your education. In addition, students who work a moderate amount (fifteen hours per week) typically get better grades than students who do not work at all.
On the other hand, it’s almost impossible to get great grades if you work full-time while trying to be a full-time student. Some students prefer not to take a job during their first year in college while they’re making adjustments to a new academic environment. You might find that you’re able to work some terms while you are a student but not others, and sometimes family obligations or challenging classes can make the added burden of work impractical or impossible.
The majority of students today find that a combination of working and borrowing is the best way to gain experience, finance college, and complete their educational goals on time.
Although you should be careful not to borrow yourself into a lifetime of debt, avoiding loans altogether could delay your graduation and your progress up the career ladder. For most students, some level of borrowing is both necessary and prudent.
The following list provides information about the most common types of student loans. The list reflects the order in which you should apply for and accept loans to get the lowest interest rates and best repayment terms.
Subsidized federal student loans are backed by the government, with interest paid on your behalf while you are enrolled in undergraduate, graduate, or professional school. These loans require at least half-time enrollment and a submitted FAFSA application.
Unsubsidized federal student loans may require that you make interest payments while you are enrolled. If not, the interest is added to the amount you owe, called “capitalization.”
Parent Loan for Undergraduate Students (called PLUS loans) are applied for and owed by parents but disbursed directly to students. Interest is usually higher than that on federal student loans but lower than that on private loans. Parents who apply for PLUS loans must provide information on the FAFSA.
Private student loans are offered through banks and credit unions. Private loans often have stricter credit requirements and higher interest rates than federal loans do, and interest payments on private loans begin immediately.
Student loans are a very important source of money for college, but like paid employment, loans should be considered carefully. Loans for costs such as books and tuition are good investments. Loans for a more lavish lifestyle are likely to weigh you down in the future. As one wise person put it, if by borrowing you live like a wealthy graduate while you’re a student, you’ll live like a student after you graduate. Student loans can be a good way to begin using credit wisely, a skill you are likely to need throughout your life.