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.
Choosing the wrong loan can affect your chances to qualify for benefits later, so make informed decisions upfront.
Both private and federal student loans require repayment of principal and interest. However, federal loans have fixed rates and sometimes better repayment protections.
To reduce your remaining loan balance, compare loan offers and avoid high-interest options.
Your loan's APR (Annual Percentage Rate) determines your total repayment cost. Private loans often offer:
Understand how changing interest rates could affect your repayment plan over time.
Extra funds may be tempting, but avoid borrowing beyond your actual education expenses. The more you borrow, the higher your monthly payment and the longer your repayment period. Make interest payments early to reduce your remaining balance.
Learn More: The $1.5 Trillion Student Loan Debt Crisis
Missing even a single payment can result in:
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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Borrowers are automatically placed in the standard10-year plan, but income driven repayment (IDR) plans may be better suited for those with lower incomes or larger loan balances.
Options include:
These plans base your payment on your income and family size, and may lead to student loan forgiveness after 20–25 years. PSLF can forgive the remaining balance in just 10 years for eligible borrowers in public service.
Don’t miss your chance to access aid. The FAFSA typically opens on October 1st. Late applications can delay or reduce your ability to get federal student loans.
If you plan to apply for private loans or scholarships, start early. Some lenders and government programs require early submission.
Private loans often require a co-signer to qualify. Co-signers are fully responsible for the student debt if the borrower can't repay it.
Unlike private loans, federal student loans do not require co-signers. Prioritize federal loans to protect both you and your family.
Your student loans affect your credit in several ways:
A strong credit score supports your future ability to borrow, rent, or even qualify for employment.
Refinancing can simplify student loan payments, especially if you’ve got student loan debt from multiple lenders. But beware:
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 offers support for borrowers through updated IDR plans, increased oversight on institutions, and new student loan forgiveness measures, especially for those in public service or who meet certain requirements.
Make informed decisions today for a financially secure future—one where your college education is an asset, not a burden.
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.
