The first thing is choosing federal loans before borrowing from other sources. To apply for federal student loans, you must complete the FAFSA, the application for federal student loans. These loans require no credit history and are driven by your income. In addition, with federal loans, you can receive “forgiveness” for the loan–private loans do not offer forgiveness.
Second, realize that on the federal loan you will pay interest and fees. This means that you will owe more than you borrowed. Although the rate changes every year, federal student loans are at 5.05 percent. Private loans need you or a cosigner’s credit history to determine your risk, and therefore your interest rate.
Third, upon your agreement to the loan, your school of choice will “take it from there”. The loan will be paid to the school after your sign a promissory note saying that you will repay it. The financial aid office at your school will handle the money and apply it to your account. If you do not use the money by the end of your degree, you can use the leftover money for other expenses.
Fourth, this money can only be used for things relating to your education. Do not get a student loan with the idea that you will buy a new car with it at a discounted interest rate. These loans will include things such as clothing, books, and other things tied to getting your education. For example, you can use these loans for groceries, personal supplies, and off-campus housing. You cannot use the funds for entertainment, vacations, or takeout food.
Last, if possible, when you finish your degree and start making loan payments, set them up as auto-debit payments. Handling these payments and staying organized is easier if you do not have to remember to make the payments. If you are on a tight budget, it may be better for you not to set up your payments as automatic draws from your bank account.