If you're planning to attend college (or have a child who is enrolling), you've probably realized how much a higher education can cost. Tuition at state universities can cost more than $10,000 each year while the top schools in the country can cost as much as $50,000 each year. Unless you have access to assets that can pay for the tuition costs, you may need to consider getting a student loan to cover the cost.



Using a student loan to pay for college requires an ability to manage your finances well. If you lack fiscal responsibility, you'll find that a student loan can lead to financial problems after graduation. You can avoid nasty surprises by understanding the process of getting a student loan, who is involved at each step of the loan process and how to repay your loan.

Understanding Who's Involved

Initially, you may think that the only parties involved in the student loan process are the lender and you. However, there are many other parties that may be involved. First, your college creates the financial aid package for you. There's also a "guaranty agency" that insures the loans for lenders. There can be a "loan servicer" involved that often works with lenders under contract to manage their student loan portfolio. Finally, your lender may sell your loan into the secondary market once the loan is secured. If that happens, the lender will notify you in writing that your loan has been sold.

Understanding Your Responsibilities

A student loan works in the same manner as most other loans. By signing for the loan, you are essentially making a promise to repay the loan according to the details on the promissory note. You're also agreeing to make timely payments on your loan even if you don't receive monthly statements from your lender. Also, if your status changes in any way (i.e. you graduate from school, you stop attending, you change addresses, etc.), you need to notify your lender. While your responsibilities are simple, it's good to keep them in mind.

Repaying Your Student Loan

For most student loans, you'll need to begin making monthly payments 6 months after you graduate or your status as a student drops below half-time. Though your student loan will accrue interest while you're attending school, the interest is subsidized by the government. This subsidization continues through the 6 months between graduation and your first loan payment.

Because college graduates often have unique financial circumstances, you'll likely have a choice of different loan repayment schedules. Most standard repayment plans allow students to repay their loans over several years. If you're on a particularly tight budget, your lender may also offer you an income-sensitive repayment schedule. The overall cost of your loan on this schedule will usually be a bit higher than the standard payment plan.

Managing Your Finances With A Student Loan

These days, the cost of higher education often makes getting a student loan necessary. The key is understanding who's involved in the loan process and managing your finances responsibly.