How Your Student Loan Dollars Make Good Sense

By John L. Fischer, Personal Finance Writer

"If you think education is expensive, try ignorance."

Those words, courtesy of former Harvard University President Derek C. Bok, say a lot about the overall value of student loans.

You know that the journey to higher education takes a whole lot more than ambition (just take a quick look at today's tuition costs, if you have any doubts). But preparing for student loans now can pay off in many different aspects of your life later.

How student loans go beyond your college degree

They say that education can't be taken away from you. So in tough economic times like these, why not think "knowledge" — not "dollars"?

In the meantime, though, you can treat student loan searches like "extra credit" projects; think of it as continuing education:

  • Build and maintain a strong credit history. Even though you can get many different student loans with bad credit (and most federally funded loans without even undergoing a credit check), maintaining a solid credit history is always the right move.

    The same goes for private student loans. Even though you should use all your federal loan possibilities, first remember that all private student loans carry higher interest rates (often twice as much as government college loans).

    What's more, if you're considering combining your student loans (be sure to check with your school to learn more about financial aid limitations), most financial experts will tell you that good credit offers many different student loan consolidation options.
  • Take advantage of new education rules. Only time will tell the real future of student loans. But recent events seem to favor the borrower.

The College Cost Reduction and Access Act (signed into law in fall 2007) says that government subsidized student loans will be cut in half over the next few years. In fact, if you have college loans to pay off, the new rules could save you over $4,500 dollars over the life of the loan.1

And some more good news: Any loan not paid off after 25 years will be officially taken off the books.

Footnotes
1 National Association of Student Financial Aid Administrators