“Michigan students and families cover a significant portion of their higher education costs,” said state treasurer Rachael Eubanks. “When student borrowers become their own financial advocate, they can better understand how to manage and benefit from the financial aid they receive. Please consider carefully only accepting loans that are necessary. The choices made by students today will have results later in life.
To make the best decision about student loans, MI’s student support team recommends seven best practices when considering student loans:
Complete the Free Application for Federal Student Aid (FAFSA). Colleges use FAFSA information to determine their financial aid awards. By completing and submitting the FAFSA, students maximize all of their financial aid options.
Understand that loans must be repaid. Not all financial aid included in a financial aid award letter is free money. Many financial aid scholarships will include federal student loans. Unlike grants and scholarships, loans must be repaid with interest.
Check the amount of interest offered on a loan before accepting it. Federal student loans, parent loans for undergraduate students (PLUS), and private loans have varying interest rates and repayment terms. Before taking out loans, students should identify and compare the interest rate of each loan, then accept the loans with the best interest rates and repayment terms.
Accept only the amount you will need. Students can either decline a loan or request a lower loan amount, and the financial award letter should include instructions on how to do this.
Beware of loan scams. In a typical student loan scam, a scammer will request banking information from a student seeking loans. The scammer usually claims that they will use the information to make a direct deposit to the student’s account in exchange for an upfront fee paid with gift cards. Instead, the scammer accesses the student’s bank account and withdraws funds.
Visit the school’s financial aid office once per semester. Even though students don’t have to start repaying their loans while they’re in school, they don’t have to wait to understand their responsibilities. Students should know the status of their college or university’s student account and keep track of the types of aid they receive. By making it a habit, students can avoid over-borrowing and stick to their budget.
Create a studentaid.gov account. The studentaid.gov website, operated by the US Department of Education, is a one-stop-shop for managing federal student aid. With a studentaid.gov account, students can track their federal student loans, check the interest rate for each, and the total interest accrued to date. Students can also review different repayment options, estimate monthly payments, and find out who their loan manager is talking to when repayment begins.
According to the Federal Reserve Bank of New York, individuals nationwide have nearly $1.6 trillion in outstanding student loans.
For more information, go to michigan.gov/mistudentaid or contact MI Student Aid at [email protected]1-888-447-2687 or on Facebook, Twitter and Instagram.