You’ve filled out the FAFSA for financial aid, determined how much money your family should contribute to your college education, and begun looking into financial aid options. If you’re considering taking out a loan, be sure you know your financial obligations. Borrowing money carries with it a great responsibility. The following information, compiled from the Federal Student Aid website, will help you determine whether taking out a loan is right for you.
Once you’ve committed to taking out a college loan, you’ll be required to sign a promissory note. The promissory note is a written promise that you will pay, at a fixed or determinable future time, a sum of money to a specified bearer. In the case of student loans, the note will outline that you must repay the loan, except in cases of cancellation of the loan. Keep in mind that you have to pay off the loan even if you don’t complete your college education. You’re taking a big step, so be sure you understand all the terms of the promissory note. Keep a copy of it in a secure place because you’ll refer to the promissory note if any questions about your obligations arise.
The entity that will service your loan depends on the type of loan you have. When borrowing a Perkins Loan, the school that lends you the money or an agency employed by the school will service the loan. The Direct Loan Servicing Center will handle all Direct Loans.
When taking out a Direct Loan you will have to take part in entrance and exit counseling. Entrance counseling occurs before you receive your first loan disbursement and will cover the importance of repaying your loan and the rights you possess as a borrower. In the exit session, you’ll be presented with the available loan repayment options.
When you do begin repaying your college loan, you must make the full payments (agreed to in the promissory note) on time. Partial or late payments may cause you to go into default, which could have serious financial repercussions. Setting up automatic payments through your bank or credit card is an easy way to keep on top of your loan.