It’s no secret: whether you're a college-bound student or a supporting parent, planning how to pay for higher education is critical. Student loan debt is now one of the largest categories of consumer debt in the U.S., and for many borrowers, federal student loans are necessary to access a valuable education.
If you're not careful, student debt can grow rapidly. You’re still responsible for repayment—even in bankruptcy—so it's important to understand how the student loan process works. Avoid these 10 common mistakes to keep your finances on track and your monthly student loan payment manageable.
When you complete the FAFSA (Free Application for Federal Student Aid), you may not qualify for enough aid to cover your college costs. At that point, you may consider private or consolidation loans. But each type of loan has different terms, interest rates, and eligibility criteria.
The loan you choose at the start can shape what you’re able to qualify for later, so it pays to look closely before signing.
Both private and federal student loans require repayment of principal and interest. However, federal loans have fixed rates and sometimes better repayment protections.
To lower your remaining loan balance, review offers carefully and think twice before locking yourself into high-interest terms.
Your loan’s APR (Annual Percentage Rate) has a direct impact on what you ultimately repay. Many private lenders present two structures:
A rate that looks manageable today can shift later. Consider how future changes could alter your repayment plan before committing.
It is easy to accept the full amount offered, especially when extra funds feel like a cushion. But borrowing beyond actual education costs increases your monthly payment and stretches out the repayment period. Paying interest while still in school, when possible, can help keep your remaining balance from climbing.
Learn More: The $1.5 Trillion Student Loan Debt Crisis
Skipping even one payment can trigger:
Federal student loans offer protections like deferment, forbearance, and forgiveness through the PSLF program (public service loan forgiveness) or Teacher Loan Forgiveness. Private lenders, however, may not offer any special repayment plans.
Always budget for your monthly student loan payments and seek help if you're falling behind. Your account and credit history depend on it.
Remember that federal student loans offer a six month grace period after graduation before borrowers have to make a monthly payment. Private lenders have no obligation to provide grace periods, or alternate payment options like debt forgiveness.
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Most borrowers are placed in the standard 10-year schedule by default. That works for some, but others may benefit from an income driven repayment (IDR) approach, especially if earnings are modest compared to the loan balance.
Common options include:
An income driven repayment IDR option adjusts your monthly payment based on earnings rather than loan size alone. If your income is limited, this structure can create breathing room without pushing you into delinquency.
Income based repayment and income contingent repayment are two long-standing versions of income driven repayment. Each uses a formula tied to income and household size, and each has different rules about interest and repayment timelines. Reviewing the fine print before selecting an idr plan matters.
The public service loan forgiveness pathway, often called the pslf program, allows qualifying borrowers working in government or nonprofit roles to pursue loan forgiveness after making the required number of payments under an eligible plan.
Most of these protections apply only to federal student loans. Private lenders set their own terms and rarely mirror the same repayment safeguards, which is why understanding the difference before choosing a plan is critical.
These programs calculate payments using your income and family size. In many cases, borrowers may qualify for student loan forgiveness after 20 to 25 years of consistent payments. Those working in public service may see the remaining balance forgiven after 10 years through PSLF, provided they meet the requirements.
Timing matters. The FAFSA usually becomes available October 1. Waiting too long can shrink your access to federal student loans or delay processing.
If you are considering private loans or scholarships, start earlier than you think you need to. Some lenders and government programs close applications well before funds run out.
Many private loans require a co-signer in order to qualify. That person is equally responsible for the debt if the borrower fails to repay it.
By contrast, federal student loans generally do not require co-signers. When possible, rely on federal loans first to reduce risk for both you and anyone helping you.
Student loans show up on your credit report, and how you handle them matters:
Your credit score influences more than future loans. Landlords, insurers, and some employers review it, so consistent payment habits carry weight.
Refinancing can streamline student loan payments, particularly if you are juggling multiple accounts. Lower rates are appealing, but there are tradeoffs.
Only refinance if you're confident that private loan terms will save you money long-term and if you're not planning to apply for any federal student aid-linked benefits.
Before taking on student loan debt, explore your options. Use available resources from the Department of Education and your school’s financial aid office to ensure you understand:
The Federal government continues to adjust options for borrowers, including updated IDR plans, closer oversight of institutions, and expanded student loan forgiveness efforts. Many of these provisions focus on those working in public service or individuals who meet certain requirements.
Some borrowers will see their loans fully repaid over time through steady payments, while others may pursue relief tied to policy changes. The Supreme Court has already weighed in on broad cancellation efforts proposed by the Biden administration, which is a reminder that rules can shift. Before you rely on any proposal, understand what your current plan bases payments on, confirm that you are properly enrolled, and assess your own long-term ability to repay. Unlike other forms of debt, student loans are rarely tied to traditional collateral, which means the consequences of missteps often follow your income and credit rather than a specific asset.
If you need help handling your debts, reach out to one of our expert counselors. We can help you set up a financial plan that fits your needs and get you to graduation with as little debt as possible.
