Student loans 101: Being a smart borrower could save you big money

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When Sergio Torres started college at AIB four years ago, he felt overwhelmed by the financial aid process. He’s a first-generation college student whose parents emigrated from Mexico.

“My parents weren’t able to help me much with finances, budgeting, loans and scholarships, so that was something I had to figure out on my own,” he said. “I met with a financial aid adviser every term, but at first I didn’t really understand what they were telling me.”

Freshman year, Torres received some academic scholarships and need-based grants, and he accepted all of the loans that were offered to him — about $8,000 worth. His sophomore year he moved home to Newell and took classes at nearby Iowa Central Community College, taking out another $2,000 in loans.

Torres headed to Ames to start his junior year at Iowa State, taking out $5,000 in loans, and bringing his total to $15,000.

“At first I didn’t really think through the impact that loans would have on my future, and I thought it was OK to take all of the loans I was offered,” he said. “Now I understand that it’s best to graduate with the smallest amount of loans possible."

Torres worked more during the school year to avoid taking more loans and pay off existing ones. He became more involved in campus activities and applied for all of the scholarships he could.

Torres’ commitment paid off. With his 3.9 GPA, range of activities and status as a first-generation college student, he qualified for enough academic scholarships and need-based grants to cover his full tuition, room and board for his senior year so he didn’t need more loans.

He has one semester left and will graduate in December. He hopes to avoid taking out additional loans and plans to earn enough money to pay his loan debt down to about $12,000 by graduation day.

“I used to think the financial aid process was intimidating,” Torres said, “But now that I understand it better it’s really not that scary.” (Read More...)