What you need to know before signing your student loan agreement
- Many people who sign their student loan agreement don’t know what they’re getting into.
- Tony Aguilar, who has six figures in student loans, has dedicated his career to helping people find long-term solutions.
- He suggests applying for more scholarships and asking about Parent PLUS loans.
- Read more stories from Personal Finance Insider.
Federal student loan repayments may be suspended until Aug. 31, but 7.4 million borrowers under age 25 hold $102.9 billion in federal student loan debt, according to Federal Student Aid.
Tony Aguilar, CEO and co-founder of an app called Chipper that helps borrowers choose the best repayment plans for their federal and private student loans, insists the best solution is to avoid borrowing money. money for college in the first place.
Aguilar himself took out six-figure student loans to pay for his degree. He tells Insider, “The first experience I had was getting the multiple letters in the mail after that six-month grace period. I had 18 different loans from four different servicers when I left the company. school. I had a mix of federal and private loans, and I was in shock at having to pay $1,200 a month.”
Since then, Aguilar has dedicated his career to finding long-term solutions to the student debt crisis, helping 5,600 people get their student loans forgiven through the Public Service Loan Forgiveness Program.
He tells Insider three important things you need to know about student loans before signing your student loan agreement.
1. You can ask your school for an additional grant
Aguilar says, “Make sure you’ve maximized the amount of grants and awards you can get from your school.” He explains that when many people first receive their financial aid, they believe that everything on that piece of paper is set in stone. Aguilar encourages people to apply for more money from the financial aid office. He says, “There’s so much money sitting there in the schools just because people don’t find out about it.”
He recommends using the following script: “I want to maximize the amount of scholarships I qualify for. Are there other scholarships available before I take out other student loans?”
2. You can withdraw from Parent PLUS loans
A Parent PLUS Loan is a federal loan that parents take out for their children’s college tuition. Aguilar says Parent PLUS loans are automatically included in many borrowers’ financial aid packages, but most people don’t know you can opt out.
He says, “I personally wouldn’t want my parents to automatically go into debt, especially when those interest rates hit 7.9% and they have to start paying immediately.” If you want to go this route, Aguilar suggests telling your financial aid office, “I don’t want my parents getting PLUS loans. I’d rather put them under my name.”
3. You can start paying off your loans while you’re in school
Aguilar says, “A lot of people believe you can’t pay off your loans or contribute while you’re in school, but this is a huge opportunity to reduce the amount of interest that will accrue by the time you graduate.”
Making student loan payments while you’re in school can reduce the monthly payments you make after you graduate. In addition, you have the advantage of reducing the amount of interest accrued over the long term. Other than subsidized federal loans, most loans start earning interest the day the funds are disbursed to the school.
Aguilar says, “If you can reduce your debt and start contributing to your debt bit by bit, definitely do it while you’re in school.”