College students must be careful with loans, finances

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 Whether you are saving or borrowing money, you need to pay close attention to your interest rate, according to the Kentucky Higher Education Assistance Authority (KHEAA).

For savings accounts and other investments, look for the highest interest rate you can earn — but beware of opportunities that promise tremendous interest rates. Those all too often turn out to be scams in which you will lose your money. If it sounds too good to be true, it probably is.

Also look for investments in which you can earn compound interest. That means you earn interest not only on the amount you invest, called the principal, but also on the interest you have already earned on the principal.

When it comes to loans and credit cards, compare the annual percentage rate (APR). The lower the APR, the less you will have to pay in interest if you carry a balance on your card.

Look carefully at loans that carry a variable or adjustable interest rate. That means the interest rate you pay will go up or down depending on market conditions. Right now, interest rates are low. When they rise, your monthly payments will go up with them. You might prefer a fixed interest rate. It may start out higher than a variable rate, but it won’t increase like most variable rates do.

KHEAA is the state agency that administers Kentucky’s student aid programs, including the Kentucky Educational Excellence Scholarship (KEES).

To learn how to plan and prepare for higher education, go to www.gotocollege.ky.gov. For more information about Kentucky scholarships and grants, visit www.kheaa.com; write KHEAA, P.O. Box 798, Frankfort, KY 40602; or call (800) 928-8926, ext. 6-7372.