Buffalo, NY (WBEN) 'Tis the season. As the calendar slips toward the end of summer and as the approach of the school year arrives, many have student loans on their minds, whether it's taking them out or paying them off.
Amidst the student loan moratorium, there are schools of thought on which loans to take and whether to work on paying any loans off during this period of time.
WBEN is in touch with one local expert who has some helpful advice on both important issues for students and families.
Jeff Boron of sendyoukidstocollege.org says the loan he recommends is the direct loan. "It's issued by the government. They're still at a very low interest rate, and that's for upcoming loans as bills are due," says Boron.
"Freshmen can take $5,500 without the need for a parent to co-sign. It's the first step and it's a given students will be taking these out."
Boron adds there is a second step that involves shopping with private loan providers or looking at the pros and cons of the Parent Plus loan, which is in the parent's name only.
"When you're looking at private loans through banks, it comes down to looking at the rate based on most likely the parent's credit score because the parent must co-sign. I always warn it's more than just signing your name" because the parent is on the hook and that can affect the parent's credit rating."
When it comes to paying down student debt, the moratorium is nothing more than "kicking the can down the road," says Boron.
"What I tell students is if they can afford to make payments during the moratorium, that money will go directly toward the principal. That's a great idea because it will reduce your debt, reduce your overall interest you'll pay over the course of the loan, and it's going to improve your credit score at the same time."
Boron says if you're thinking about investing instead of paying, he says you're better off paying the loan because the moratorium likely will not be extended past February. A different strategy? "One of the strategies has been to open a savings account and put those payments in a savings account and once the moratorium is over, take the money and put it towards paying down principal on the highest interest rate loan," notes Boron.
Boron says don't dip into the savings account for something you don't necessarily want or need now.
