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Things to consider before getting a student loan

By Paul Nelson | Posted - Jul 18th, 2013 @ 7:45am



SALT LAKE CITY — A group of senators in Washington have reached a deal that would keep Stafford student loan rates down through the 2015 academic year. Still, financial counselors say there are things they wish students knew before they got any kind of financial aid.

According to some counselors in Utah, many students and their parents don't research their options when it comes to financial aid.

"It's one of those things where you don't want to wait until the last minute. You want to, no pun intended, do your homework on a student loan," said AAA Fair Credit Foundation President Preston Cochrane.

When parents talk with college advisers about options for their kids, Cochrane said, the children should be very involved in the conversation. They need to realize mom and dad will not always be their safety net to get them out of trouble if they default on the loan.

Borrow only what you need

When it comes to deciding how much a student should borrow, Cochrane said ask for as little as possible. That will determine how much debt students are in after they graduate.

"A lot of times, students go into college not really knowing what they want to pursue. So, they'll use their student aid and financial aid for classes that don't really have anything to do with what they're going to do in the future," Cochrane said.

He said he has seen several cases in which an older student wasn't able to qualify for the financial assistance they were able to get when they were younger, so they dropped out of school.

Bankruptcy can't help you

For some people, debt becomes too much and they just don't have what they need to pay off those debts. A lot of people in this situation may turn to bankruptcy. But even if they did declare bankruptcy, they would still need to pay off their student loans.

"You can't discharge student loans in bankruptcy," Cochrane said.

He explained there are exceptions to this rule, but they're very hard to qualify for. The student would have to prove that paying off the loan would cause an extreme hardship, and Cochrane said proving that is very difficult.

Avoid default like the plague

You never want to default on any loan — ever. It can cause serious damage to your credit score and make it hard to borrow more money when you need it. But if there is one loan out of all of them that you especially don't want to default, it's a student loan.

"It doesn't ever come off your credit (history). If you default on it, it's never going to go away. It's going to follow you the rest of your life," Cochrane said.

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