What You Should Know Before Signing Your Student Loan Agreement

Emily Parkin
  • Many people who sign their student loan agreements don’t know what they’re getting into.
  • Tony Aguilar, who has six figures in student loans, dedicates his career to helping people find long-term solutions.
  • He suggests asking for more scholarship money and asking questions about Parent PLUS loans.
  • Read more stories from Personal Finance Insider.

Federal student loan payments may be on pause until August 31 , but 7.4 million borrowers under 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 pick the best repayment plans for their federal and private student loans, insists that the best solution is to avoid borrowing money for college in the first place.

Aguilar himself took out six figures of 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 school. I had a mix of federal and private loans, and I was in shock that I had to pay $1,200 each 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 should know about student loans before signing your student loan agreement.

1. You can ask your school for more grant money

Aguilar says, “Make sure you’ve maximized the amount of grants and awards that you can get from your school.” He explains that when many people first get their financial aid package, they believe that everything on that piece of paper is set in stone. Aguilar encourages people to ask for more money at the financial aid office. He says, “There are so many funds that are just sitting there at schools just because people don’t inquire about it.”

He recommends using the following script: “I want to maximize the amount of grants that I qualify for. Are there any more scholarships available before I take out more student loans?”

2. You can opt out of Parent PLUS loans

A Parent PLUS loan is a federal loan that parents take out for their children’s tuition. Aguilar says that Parent PLUS loans are automatically included in many borrowers’ financial aid packages, but most people don’t know that you can opt out.

He says, “I wouldn’t personally want to get my parents into debt automatically, especially when those interest rates are up to 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 to get PLUS loans. I would prefer to put them under my name.”

3. You can start paying back loans while you’re in school

Aguilar says, “A lot of people believe that you can’t pay off your loans or contribute while you’re in school, but it’s such a huge opportunity to reduce the amount of interest that’s going to accumulate by the time you graduate.”

Making payments on your student loans while you’re in school can reduce the monthly payments you make after you graduate. Plus, you have the advantage of reducing the amount of interest that accrues in the long run. Besides federal subsidized loans, most loans start accruing interest the day the funds are disbursed to the school.

Aguilar says, “If you can chip away and start contributing little by little toward your debt, definitely do so while you’re in school.”

https://www.businessinsider.com/personal-finance/basic-student-loan-agreement-terms-2022-3

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