Arizona Tribune - Northwestern Mutual: 5 Things to Do Before Taking Out Student Loans

From understanding how student loans work to considering how much college costs, these steps may save borrowers some money and help them manage their debt more responsibly:

1. Complete a FAFSA Application (And Do So Every Year)

The first step for any student looking to fund their education with loans or grants is to complete the Free Application for Federal Student Aid (FAFSA). This form is the gateway to most types of financial aid, including federal student loans, grants and work-study programs.

Students need to remember that FAFSA isn't a one-time thing. It needs to be completed every year they are in school. Reapplying annually may ensure students remain eligible for aid throughout their academic journey.

Missing the deadline could result in less financial assistance, meaning students may need to rely more on private loans or other forms of aid.

2. Read the Financial Aid Offer Letter Carefully

Once students complete the FAFSA, they will receive a financial aid offer letter from their chosen schools. This letter details the aid package a student is eligible for. It's essential to read this letter carefully and understand what's being offered.

A closer look at the letter could reveal important details like interest rates and repayment terms. This step helps students get a clear picture of how their financial aid will impact their long-term financial obligations and can also guide their decision-making on whether or not they need to borrow the full amount offered.

3. Know the Necessary Amount and Only Accept That Amount

It's easy for students to feel they need to accept all the loan money offered, but that's not necessarily the best financial strategy.

Before accepting any loan, it's vital to assess how much college costs for their specific situation, taking into account tuition, fees, books (if they're not all online) and living expenses.

Students should only borrow what they truly need - accepting more than the necessary amount could result in larger debts to repay after graduation, potentially putting more debt on the borrower.

4. Compare Private Student Loans

While federal loans tend to offer more favorable terms for most students, there are times when private student loans might be necessary to bridge the gap between what federal aid covers and the total cost of education. When considering private loans, students should compare different lenders' terms carefully.

Key factors to compare include interest rates, repayment terms, and whether the interest is fixed or variable. Private loans tend to have higher interest rates than federal loans and the borrower's credit score could play a role in the rate at which they qualify.

5. Know Payment Start Date to Avoid Missed Payments

One often overlooked detail is when loan repayment begins. For most federal student loans, repayment starts six months after graduation or after dropping below half-time enrollment. However, private loans may have different terms, with some requiring payments while the student is still in school.

Students need to know when their payments will start so they can plan their finances accordingly. Setting up reminders or automatic payments could help avoid missed payments, which could negatively affect their credit score.

Take the Time to Learn About Student Loans Before Committing

Taking the time to follow these five steps before taking out student loans could make a difference in a student's financial well-being.

By being proactive, reading the fine print and borrowing responsibly, students (or their parents) could ensure they're setting themselves up for financial success both during and after their college experience.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries in Milwaukee, WI.

Contact: Don Klein, 1-800-323-7033

SOURCE: Northwestern Mutual

Ch.Campbell--AT