Student Loans
Think Before You Borrow
Student loans can help cover education costs when scholarships, grants, savings, earnings, and other resources aren't enough.
But unlike scholarships and grants, student loans must be repaid—with interest.
Before borrowing, understand:
- How much you actually need
- Who is borrowing
- Interest rate and fees
- When interest begins accumulating
- When repayment begins
- Available repayment options
- How much you may borrow over your entire education
- What your future monthly payment could mean for your budget
Borrow Last
Student loans shouldn't automatically be your first solution to a remaining college cost.
First explore scholarships and grants, savings and family resources, student earnings, payment plans, and ways to reduce your expenses.
Borrow only what you still need.
Explore Ways to Cover Your Remaining Costs →
Understand the Cost of Borrowing
When you take out a student loan, you're borrowing money today that you'll repay in the future.
Principal
The principal is the amount you borrow.
Interest
Interest is the cost of borrowing that money. It's calculated as a percentage of the unpaid principal balance.
Depending on the loan, interest may begin accumulating immediately or may be subsidized during certain periods.
Fees
Some student loans also charge fees that increase the cost of borrowing.
That means borrowing $5,000 can ultimately cost you more than $5,000 to repay.
Know Your Two Main Options
Student loans generally fall into two categories.
Federal Student Loans
Federal student loans are offered through the U.S. Department of Education.
For undergraduate students, federal Direct Loans may offer advantages such as:
- Fixed interest rates
- No credit check for Direct Subsidized and Unsubsidized Loans
- No cosigner for Direct Subsidized and Unsubsidized Loans
- Federal repayment options
- Options for temporary payment relief in qualifying circumstances
- Access to certain federal loan forgiveness or discharge programs for eligible borrowers
Students apply for federal student aid by completing the FAFSA.
Learn About Federal Student Loans →
Private Student Loans
Private student loans are offered by lenders such as:
- Banks
- Credit unions
- State-based or nonprofit lenders
- Other private financial institutions
Eligibility and loan terms are established by the lender and may depend on the borrower's or cosigner's credit.
Private loans may have:
- Fixed or variable interest rates
- Different repayment options
- Different fees
- Different cosigner requirements
- Different borrower protections
Learn About Private Student Loans →
Compare Federal and Private Student Loans
Understanding the differences can help you make a more informed borrowing decision.
| Federal Student Loans | Private Student Loans | |
|---|---|---|
| Lender | U.S. Department of Education | Bank, credit union, state/nonprofit lender or other private lender |
| Interest Rate | Fixed | May be fixed or variable |
| Credit Check | Generally not required for Direct Subsidized and Unsubsidized Loans | Usually based on credit |
| Cosigner | Not required for Direct Subsidized and Unsubsidized Loans | May be required |
| Repayment Options | Federal repayment plans and protections | Determined by lender |
| Temporary Payment Relief | Federal deferment or forbearance may be available | Depends on lender |
| Forgiveness/Discharge | Certain federal programs may be available to eligible borrowers | Generally more limited and lender-specific |
Federal student loans generally provide protections and repayment options that aren't available with private student loans.
Compare the complete terms—not simply the advertised interest rate.
Start With the Amount You Actually Need
Don't begin with:
How much can I borrow?
Begin with:
How much do I still need?
Suppose your remaining cost is $8,000.
After reviewing your options, you identify:
$2,000 in additional scholarships
$2,000 from savings and family contribution
$1,500 from student earnings
Your remaining gap is:
$2,500
If you can responsibly borrow $2,500, don't automatically accept a larger loan simply because more is available.
You Don't Have to Accept Every Loan You're Offered
A financial aid offer may include student loans.
That doesn't mean you have to accept the full amount.
You may be able to:
- Accept the full loan
- Accept a smaller amount
- Decline the loan
Review your budget and other resources first.
Borrow based on what you need—not simply what you've been offered.
Think Beyond This Year's Loan
One year's borrowing can seem manageable.
But college usually lasts more than one year.
If you borrow:
$7,000 each year × 4 years = $28,000 borrowed
And that's before considering the interest you'll pay.
Each year, track:
- What you've already borrowed
- What you're borrowing this year
- How much you expect to borrow in future years
- Your estimated total at graduation
Your borrowing decision should be based on the entire education, not one semester at a time.
Estimate Your Future Payment Before You Borrow
Don't wait until graduation to find out what your student loan payment might look like.
Before borrowing, estimate:
- Your projected total student loan debt
- Potential monthly payment
- Length of repayment
- Total amount repaid
- Total interest paid
Federal Student Aid's Repayment Calculator can help you explore potential repayment options for federal student loans.
Estimate Federal Student Loan Repayment →
Put That Payment Into a Future Budget
A future student loan payment won't exist by itself.
After completing your education, your budget may also include:
- Housing
- Utilities
- Food
- Transportation
- Insurance
- Health care
- Phone and internet
- Savings
- Credit card or other debt
- Personal expenses
Ask yourself:
Would the estimated student loan payment fit alongside my other financial responsibilities?
A payment that looks manageable by itself may feel very different when it's part of a complete monthly budget.
Connect Borrowing to Your Career Plan
Your career doesn't guarantee a particular salary, but expected earnings can provide useful context when deciding how much debt you feel comfortable taking on.
Research:
- Typical starting salaries in your career
- Employment opportunities
- Education requirements
- Additional education you may need
- Other debt you may need for graduate or professional school
Then compare those expectations with your projected student loan balance and payment.
The question isn't simply:
Can I get this loan?
It's:
Does this amount of borrowing make sense for the education and career I'm pursuing?
Remember the 1% rule.
Students often find it easier to borrow now and worry about it later. Student Loan Game Plan uses several methods to help borrowers understand the consequences of over borrowing. Remember the 1% rule. Figure 1% of your total amount borrowed as your monthly payment for 10 years after you finish school.
If you borrow $50,000 total, your monthly payment will be approximately $500 per month for 10 years.
Understand Who Is Borrowing
Pay attention to whose name is on the loan.
Student Borrower
A loan borrowed by the student is the student's legal responsibility.
Parent Borrower
A parent loan is the parent's legal responsibility—even when the loan is being used to pay for the student's education.
Cosigner
A cosigner on a private student loan also accepts legal responsibility for the debt according to the terms of the loan.
Before anyone signs, make sure everyone understands:
- Who legally owes the debt
- Who is expected to make payments
- What happens if payments aren't made
- Whether and how a cosigner may eventually be released
Compare More Than the Interest Rate
Interest rate matters, but it isn't the only factor that determines whether a loan is a good fit.
Compare:
- Fixed vs. variable interest rate
- Annual Percentage Rate (APR)
- Fees
- When interest begins accumulating
- In-school payment requirements
- Repayment term
- Monthly payment
- Total estimated repayment
- Deferment or forbearance options
- Cosigner requirements
- Cosigner release options
- Borrower protections
- Forgiveness or discharge eligibility
A loan with a lower advertised rate isn't automatically the better loan if it provides fewer protections or less flexibility.
Understand the complete terms before you borrow.
Keep Track of Your Borrowing
Don't wait until graduation to find out how much you've borrowed.
Each year:
- Review your existing loan balances.
- Add any new borrowing you're considering.
- Estimate your total borrowing at graduation.
- Revisit your expected monthly payment.
- Decide whether your education plan is still financially sustainable.
Federal student loan information is available through your StudentAid.gov account.
Private loan information will come from your lender or loan servicer.
Plan for Repayment Before You Borrow
Repayment may feel far away when you're choosing a college or starting school.
But understanding what repayment could look like before you borrow can help you make a better decision today.
Know:
- When repayment is expected to begin
- What your estimated payment could be
- What repayment options may be available
- Who will manage your loan
- What responsibilities come with borrowing
Then make your borrowing decision with the future in mind.
Learn About Student Loan Repayment →
Make an Informed Borrowing Decision
Before accepting a student loan, make sure you can answer:
How much do I actually need?
What type of loan am I accepting?
Who is legally responsible for repayment?
What is the interest rate?
When does interest begin accumulating?
What fees apply?
What could my monthly payment be?
How much might I owe by graduation?
What protections and repayment options come with this loan?
Does this borrowing fit my education and career plan?
Student loans can be a useful tool.
The Goal
Student loans can be a useful tool for paying for education.
Borrow intentionally. Understand the commitment. Borrow only what you need.
Federal Student Loans →
Private Student Loans →
Student Loan Repayment →
