The Six Worst Student Loan Mistakes You Can Make
That being said, here are some not-so-smart ways of borrowing money.
- Lying on your student loan application - get caught misrepresenting anything (and there's a high possibility you'll be busted, as some schools audit all financial aid applications), and you'll not only lose your loan and incur fines, but you may also be charged with fraud and be sentenced to prison.
- Spending money on wants, not needs - using loan money to buy the latest mobile phone or ultra 4k TV that will be obsolete a decade before you're done paying for it is very bad debt.
- Choosing the wrong repayment plan - choose a repayment plan with the highest payments and the shortest term that you can afford. The repayment plan with the lowest monthly payment also has the longest repayment term, which increases the total interest you will pay.
- Overlooking refinancing - what was a competitive rate years ago might be on the higher side now. Or, if you’ve taken out multiple loans, consolidating them can lower your monthly payment and reduce the total amount of interest you’ll pay.
- Missing payments - every missed or late payment is a black mark on your credit report that will ding your credit score, whether you catch up that payment or not.
- Defaulting on your loan - failing to make payments on your loan for more than 270 days will send your loan into default and your financial life into a tailspin.
A student loan is often the first large sum of money a young adult must manage themselves. Avoiding common money mistakes when it comes to financing your college education is crucial to graduating with only good debt and as little of it as possible. Read this article for a more comprehensive discussion of this topic.