What to Avoid when Taking Out a Student Loan

Paying for a college education is a huge financial commitment. According to the National Postsecondary Student Aid Study, about 66 percent of four-year undergraduate students graduate with some debt, most of it in the form of student loans. Here are four things to avoid when taking out a student loan.

1. Incorrectly Filling Out the FAFSA
   You must fill out the Free Application for Federal Student Aid (FAFSA) to be eligible for all federal student loans. Make sure you send in your application by the deadline and include all the information requested. An incomplete financial aid application could make you eligible for less financial aid or hold up your loan application.
2. Applying for Private Student Loans Too Soon
   Try to max out as much federal financial aid as possible before resorting to private loans. Although federal student loans may not cover all your education expenses, they usually have more favorable interest rates and repayment terms. Lenders look at your credit score when you apply for a private student loan.
3. Not Repairing Your Credit
   The lower your credit score the more interest you may have to pay for a private student loan. Pull your credit report at least six months before you plan to apply for a loan so you have time to correct any inaccuracies and repair your credit. If you don't have a credit history or think you may not qualify for the best rates on your own, consider finding a credit-worthy consigner.
4. Borrowing Too Much Money
   While you may be tempted to borrow as much money as you can, limit yourself to what you need to pay your education costs. Depending upon the price tag of your school, you may need student loan money to help cover your educational costs but don't go overboard. Eventually you have to repay the loans and if you take out private loans, you may have to begin repaying them while you are still in school.

Read through all the terms of your loan to make sure you understand what's expected of you. Being informed can help you avoid some of these common mistakes.

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Financial Makeover: A Practical Guide for Women. She has appeared on a variety of TV and radio shows.