Be careful how you borrow for school - GI Bill, Tuition Assistance, Veterans Education Benefits, Military College Credit, Military to Civilian Transitions - Navy Times

Be careful how you borrow for school

If you use them wisely, military tuition assistance and the GI Bill can go a long way toward paying for a college education. But for many military and veteran students, they eventually come up short.

Perhaps your graduate program charges more than the maximum TA allotment of $250 per credit hour. Maybe you’re not eligible for full GI Bill benefits, or the recent changes to the GI Bill have unexpectedly decreased the value of your benefits. If so, you may want — or need — to borrow money to make up the difference.

Such borrowing may be worthwhile but should be done thoughtfully. Protect yourself with this advice from three student loan experts: Deanne Loonin of the National Consumer Law Center, Tim Ranzetta of Student Lending Analytics and Mark Kantrowitz of the website finaid.org.

* Fill out the Free Application for Federal Student Aid (FAFSA) form for government aid and always max out on federal grants and loans before turning to other sources.

Federal loans may have higher rates — private lenders have been sweetening the terms of their student loans recently — but the new income-based repayment plan for federal loans offers protections if you experience financial difficulties or choose a lower-paying career. Federal borrowers are also more protected in case of severe disability and death.

* Be 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.

Almost all private student loans have variable interest rates that are tied to an index, such as the prime rate or the London Interbank Offered Rate index. That means there’s a good chance that the rate you start with will increase before you repay the loan — and if interest rates soar, it could rise significantly.

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

Unless you have excellent credit, you’ll need a co-signer to get the lowest interest rates on private loans. This is a serious responsibility: If the borrower can’t pay, the co-signer is on the hook for the debt.

* Borrow as little as possible, no matter how much somebody is willing to offer you. Depending on rates and repayment schedules, every $100 in loans is likely to cost around $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.

* If you’re borrowing more than around $45,000 for a bachelor’s degree, or $25,000 for an associate’s degree, think seriously about finding a cheaper school.

* A 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.