Student Loans

Student loans can be useful but only when you borrow the right amount, in the right order, with clear payback math. This guide walks you through the loan process step-by-step, shows you the common traps, and gives you a simple decision framework before you sign anything.

Federal loans (usually best first)

Pros

• Fixed rates set by the government

• Protections like income-driven repayment options (for many borrowers)

• Possible forgiveness programs depending on career/repayment plan

Cons

• Annual borrowing limits may not cover the full gap

Pros

• Can cover remaining gap

• Sometimes lower rates for strong credit/co-signer

Private loans (only after you’ve done the above)

Cons

• Fewer protections if income drops

• Rate and terms depend on credit/co-signer

• Can become expensive fast if you over-borrow

If the gap is large, don’t default to loans. First test:

• cheaper housing plan

• in-state option / transfer pathway

• community college 2+2 plan

• switching to a major with stronger ROI if you’re on the fence

If you don’t know expected salary, use conservative estimates (not best-case) or try the CollegeROI Salary Insights tool.

Fixed rate: predictable payment; usually the safer choice

Variable rate: can start lower but may rise; only consider if you can handle increases

Fixed Interest: 2.9% - 17.6% APR

Variable Interest: 4.1% - 16.9% APR

Credit Score: Mid-600s

When comparing offers, don’t focus only on APR. Also compare:

• repayment term length

• fees (if any)

• co-signer release options

• hardship/forbearance policies

• autopay discount

• when repayment begins (in-school vs immediate)

Most borrowers do better with one of these:

1. Interest-only or small payments while in school (reduces total cost)

2. Full deferment in school (lower stress now, higher cost later)

Trick: Even $25–$50/month in school can meaningfully cut interest.

Borrow year-by-year, not as a “blank check.”

Re-run your gap calculation every year because:

• aid can change

• housing costs change

• your situation changes

• you may transfer, change major, or graduate early

Before accepting the loan, confirm:

• your projected monthly payment

• total repayment amount

• whether your co-signer understands obligations

• you have a backup plan if income is lower than expected

If the math looks ugly: stop and consider switching schools, lowering cost, or reducing the timeline.

Common Mistakes (and how to avoid them)

Mistake 1: Borrowing based on “I’ll figure it out later”

Fix: calculate payment now and compare to conservative income.

Mistake 2: Ignoring the total 4-year number

Fix: compare total repayment, not just yearly borrowing.

Mistake 3: Not shopping rates

Fix: check multiple lenders (start with Sallie Mae and Ascent).

Mistake 4: Over-borrowing for lifestyle

Fix: cap housing + extras; borrow for education value, not comfort.

Use a co-signer (if available) to improve rate, then look for co-signer release terms.

1. Autopay discounts are small but guaranteed savings.

2. Pay interest during school if you can. It’s one of the highest ROI moves.

3. Shorter terms cost less overall (but higher monthly payment). Balance affordability vs total cost.

4. Avoid “too long” terms that keep you in debt forever unless payment is otherwise impossible.

Will checking rates hurt my credit?
Some lenders may offer prequalification that uses a soft inquiry; final applications can involve a hard inquiry. Always read the lender’s language on the rate-check page.

Should parents take the loan instead of the student?
Depends on who is legally responsible, the rate, and how you’re planning repayment as a family. The important part is clarity: who pays, under what conditions, and what happens if income changes.

Is a private loan ever worth it?
Yes, when the total debt is reasonable relative to expected earnings and the school/major combination passes the ROI and affordability test.

Take quick free survey to check rates here:

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