The Wild World of Student Loans: Before You Take the Loan
Around this time, some of you might be receiving letters of acceptance from grad programs. If you made it in, congratulations! Pop out some cheap bubbly. Then, when you’re done imbibing, start thinking about borrowing some money so you can stay clothed and fed while pursuing your dream.
Unfortunately, the same student loans that seem like a godsend one moment can turn into concrete boots the next. You do not want to be the grad student trying to pay off ridiculous loans when some academic jobs have a starting salary of … wait for it … $28,000. These tips might keep you from feeling trapped in a Dickensian debtor’s prison:
The Big Rule: Don’t go if you aren’t paid for it … at least partially. There’s no reason to get in the way of anyone’s dream, but the school you attend should give you an incentive for working for them. They need to provide a fellowship or a TA-ship. Take moving expenses and cost of living into account as well.
More after the jump! Barney’s Loans sign in Seattle taken by Joe Mabel from Wikimedia Commons under a Creative Commons license.
Research how student loans work. What’s a Stafford loan? What’s the difference between subsidized and unsubsidized? Visit this quick and dirty information from smartmoney.com, and you’ll have a good idea.
Don’t take out a student loan larger than a realistic starting salary for your first year. In the case of the obnoxiously low salary above, don’t take out more than $28,000. Look up salaries in various areas on sites like salary.com and glassdoor.com, and go with the worst-case scenario.
Do not ask anyone else to co-sign for your loan. By having a co-signer, you might get more money. If you go to Mom and Dad and ask for them to co-sign, keep in mind that you are putting them on the hook for your student loans as well. If you default, they will be as responsible as you are. Read this letter from a parent co-signer to bankrate.com to get a sense of the risks involved.
Take out a smaller loan if students from your grad program haven’t been getting jobs. Your future advisors will sweet-talk you and tell you everything is hunky-dory. After all, universities love that cheap grad-student labor. It behooves you to ask what the placement rate is. The lower it is, the lower the loan you need to get.
But what if you want more? Sorry to break it to you, but while you might be offered more in loans, you shouldn’t take it. You can’t get out of student loan debt through bankruptcy. It’s wrong, but it’s not changing anytime soon.
Don’t forget the interest! Yeah, that seems like a no-brainer, but the interest on your loans will go up over time, and you need to keep in mind that the final amount you pay will be more than the amount you took out in the first place. Government loans do indeed have lower interest, and as of 2010 private lenders were taken out of the equation, which made getting a student loan easier and a lot less skeevy. But you still have a loan, and you still have to pay interest on it.