Credit pros advise caution applying for student loans

PHOENIX — Students planning for college may be looking for a way to pay for higher education, which could mean taking out a student loan.

The Credit Counseling Services at Take Charge America is urging potential applicants to consider several questions before applying for that loan.

One is ‘Will the career you’re planning to pursue pay you enough money to pay off that loan?’ Another question is ‘Have you applied for a scholarship?’

“You want to eliminate as much debt as possible,” Mike Sullivan of Take Charge America said. “Look first at scholarships. Look at grants. Look at money that does not have to be repaid before you think about borrowing.

“By far, the majority of students should be looking at the least expensive way of getting college credits and finding out what kind of a career option they really have,” Sullivan said.

Here is Sullivan’s complete list of suggested questions that students should ask before applying for a loan:

• What career are you planning to pursue? Consider your future salary and ability to pay off the loan. If you’re pursuing a profession with limited earning potential, it doesn’t make financial sense to take out a big loan you’ll have difficulty repaying.

• Do you plan to attend a private university, state school or community college? Consider the affordability of your education. While your heart may be set on an exclusive private university, it’s critical to evaluate the benefits, costs and available options. The allure may not be worth the reality.

• Have you applied for scholarships or grants? As a general rule, exhaust scholarship and grant possibilities before applying for loans. Your school counselor or financial aid office can provide resources. You can also find scholarship databases online.

• Have you completed a FAFSA? Anyone heading to college should submit the Free Application for Financial Student Assistance (FAFSA). You may be surprised to learn you’re eligible for some funding, even if you or your family are not considered “low income.”

• Have you researched your federal loan options? If you need to borrow money, federal loans offer fixed-interest rates, flexible terms and borrower protections that aren’t usually available with private loans. Perkins and Stafford loans are typically the best bet. Graduate students and parents of undergraduates can apply for a Federal PLUS.

• Have you done your homework on private funding? If you must turn to private funding, research the best private loans for your financial situation. Factors to consider include: interest rate before and after graduation, loan fees, terms, due date for first payment and monthly payment amount.