Experts offer tips on loans for school

Associated Press

As credit standards for private loans have tightened, some for-profit, or “proprietary,” colleges are now lending money directly to students.

Such borrowing may be worthwhile, but here are some tips for protecting yourself on any student loan from three experts: Deanne Loonin of the National Consumer Law Center, Tim Ranzetta of Student Lending Analytics and Mark Kantrowitz of the Web site finaid.org:

UFill out the FAFSA form for government aid, and always max out on federal grants and loans before turning to other sources. Rates are lower, and the new income-based repayment plan offers protections if you experience financial difficulties or choose a lower-paying career.

UBe wary of any lender that refuses to provide information on terms and fees. Make sure you understand the repayment requirements, both for while you’re in school and after.

UIf possible, apply with a creditworthy co-signer to reduce costs.

UBorrow as little as possible, no matter how much somebody is willing to offer you. Depending on rates and repayment scheules, every $100 in loans is likely to cost about $200 by the time you repay. However, borrowing is preferable to forcing yourself to work so many hours while in school that you fail to graduate.

UFind a school that won’t set you up for failure. Especially at for-profit colleges, ask for data about graduation rates, job placement rates and average wages. If you’re borrowing more than about $45,000 for a bachelor’s degree, or $25,000 for an associate’s degree, think seriously about finding a cheaper school.

UA good rule of thumb: Don’t give yourself more total loan debt than your expected gross salary the year after you graduate. Another: Your total monthly payment on all student debt shouldn’t exceed 8 percent to 10 percent of your monthly salary.