Provided by: Access Group

A graduate education represents a major investment in yourself. As the cost of that investment has grown, so has the need to rely on student loans. According to U.S. News and World Report, nearly 60 percent of master's students, 50 percent of Ph.D. candidates and 85 percent of students in professional degree programs now put themselves through school with borrowed money.

When you borrow student loans, you really are paying for your education with your future income. Since you can't be certain what that income will be, it is important to borrow the minimum amount possible to achieve your goals, and to understand all of the details of the loans you are borrowing. As with any other financial transaction, you should read the literature provided carefully and be sure you understand "the fine print." Tedious? Yes, but it's worth it to prevent surprises that come with a high price tag.

For example, did you know that the fine print for a Federal Stafford Loan states that you must repay your student loans even if you withdraw from school and never complete your degree program? "Yes, students must repay any funds they've already received, plus any applicable interest and fees," explains Dr. Jeff Hanson, Access Group's Director of Debt Management. "There is no money-back guarantee when it comes to student loans. Even more importantly, unlike other forms of credit, student loans must still be repaid if you file for bankruptcy and discharge your other debts. It's the law." In short, a student loan is a serious obligation, and students should understand the commitment they're making when they sign their promissory note.

Promissory Note
What is a promissory note? It's the legally binding contract between you and the lender whereby you promise to repay the loan under the terms detailed in the loan document. Because the note is a legal contract, you should read it very carefully and make sure you understand it in its entirety before you sign it. As with most contracts, some of the legal terminology may be unfamiliar. "If you don't understand something," warns Dr. Hanson, "call the lender or your financial aid officer and ask for clarification. There are no stupid questions when it comes to your finances." Similarly, if you think there are errors on the promissory note, contact the lender before signing it.

Details in the promissory note will include the terms and conditions under which the loan is made, as well as your rights and responsibilities as the borrower. The stated terms and conditions should include the amount you are borrowing, the interest rate you will be charged, any fees associated with the loan, the length of the "grace period" you're entitled to once you leave school and before repayment begins, the maximum length of the repayment period itself, and the conditions under which the loan will be considered either delinquent or in default. These ...