College students who have taken out student loans to finance some or all of their education are urged to learn how their particular loans work and to educate themselves about the student loan process and financial aid options that are available. Today, about 70 percent of all students who have taken out loans have an average debt of almost $30,000. This is according to a survey conducted by LendEDU, the student loan marketplace, which shows that almost half (42.5 percent) of all students do not understand that their student loan debt affects their credit score and can disqualify them for other types of loans.
Many students also make fairly common mistakes that lead to their student loan debt increasing. One of the biggest is failing to fill out the Free Application for Federal Student Aid (FAFSA). This application is what qualifies students for the free need-based financial aid provided by the federal government. More than $150 billion dollars is allocated for FAFSA recipients every year, with those filing early typically receiving larger grants.
Another mistake made by many is failing to pay the interest on their student loans. Some private and unsubsidized federal loans do begin to accumulate interest immediately, even if the student is still enrolled in school. This interest, if unpaid, is added on to the loan, increasing the overall balance and leading to even more interest being added. This compound interest can quickly increase the amount the student owes.
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