Increasingly, tuition fees continue to rise, straining millions of students with high amounts of student loan debt. In fact, the average student graduates with nearly $30,000 in student loans. It’s a little more than a Tesla Model 3 or even a wedding. Without student loans, many people would not even be able to go to college.

For most people who go to college, student loans become a reality. But where do student loans come from, how much can you borrow and what are the real costs? In this article, you will learn everything about how student loans work.

The pros and cons of student loans

Student loans are available for undergraduate and graduate students. They are guided by the need, of which income is only one component. Student loans are issued by the government (hence the term direct loan – directly by the government). However, private student loans are also available. The amount spent on a student depends on the financial situation of the student. The final decision is up to the school.

Financial aid programs are the first step to obtaining a student loan. The financial aid program includes gift aid (such as scholarships and fellowships), loans, and professional study programs.

What are the guarantees for a student loan? It is important to remember that the guarantee of a student loan is your future income. If you buy a car and get a car loan, the guarantee of the car loan is the car. Therefore, if you do not pay the car ticket, the bank can repossess your car. With student loans, it is important to remember that the guarantee is your future income. If you don’t repay a student loan, the government can seize your salary, take your tax returns, etc. Always keep this in mind when borrowing.

How to apply for a student loan

The FAFSA, or free application for federal student aid, must be completed annually to receive financial aid. The FAFSA deadlines change every year. You can check the deadlines here. Make sure your FAFSA is submitted on time. Otherwise, a late FAFSA will certainly complicate your financial situation and force you to pay for your studies.

To get an idea of the amount of financial assistance you could receive, visit the FAFSA4caster website.

When you receive financial assistance, you receive gift aid and loan amounts. There should also be a breakdown of your school’s costs. Schools display cost information in different ways, and the actual costs may differ significantly. Depending on what is shown, you may need to ask the school for the cost:

• Tuition fees
• Case
• Food
• Travel
• Expenses (laboratories, etc.)
• Chern

Add all other known costs. It is better to overestimate than underestimate. Many students find that they are short of money even after receiving their financial aid. This is due to many costs that are not taken into account.

How much should you borrow?

Once you have an annual fee for school, deduct the gift aid and the money that your parents could have saved for College. If you have saved money for College, withdraw it as well. The number that you have left is not only the direct cost of school (tuition fees and housing), but also the cost of living that you will need during your studies. If you have a job, consider how much of the above costs this will cover. You should have a final cost number at this point.

This final figure is the amount needed for school loans. The less money you have to borrow on school loans, the better. As you can see, the amount of loans is not only for tuition fees and books. It should take into account all the costs associated with the study.

A caveat about student loans: Students often take the full amount granted, even if it is not necessary. If you don’t need the full amount, you can only take with you what is necessary. Taking more loan money than necessary costs more interest and increases your monthly loan payments.

Rule of Thumb: Our rule of thumb on how much you should borrow is simply never borrow more than you expect to earn in your first year after graduation. This will help you make sure that you never borrow too much and that you cannot afford to pay it back.