Reading Time: 3 minutes

It’s ideal to fund your college education without utilizing student loans, but a lot of times that’s not a reality. If this is the case for you, it’s important you are an educated consumer. Check out what you should know about student loans!

Types of student loans

Federal loans

Federal loans are sponsored by the Department of Education. To qualify, you need to complete your Free Application for Federal Student Aid (FAFSA). These loans have the lowest interest rates and flexible repayment options. For federal loans, you can take them out in your name or your parents’ name. (Also known as PLUS loans).

Private loans

If you’ve exhausted all of your other aid options, you may consider private loans through a bank, credit union, or loan company.  Private loans can cover the remaining costs of your education. Be aware, these loans carry a higher interest rate and repayment options are not as flexible as federal loans. These companies are also in the business of making money, so always keep that in mind as well.

Things to make note of


Unfortunately, when you borrow money, you pay back that amount plus interest. Having knowledge about interest is crucial to ensure you choose the best option available to you.

With federal loans, you will see the terms unsubsidized and subsidized. If your loan is a subsidized loan, the Department of Education will not charge you interest while you’re enrolled in classes. Your loan accumulates interest six months after you graduate or drop below six credit hours.

If your loan is unsubsidized, it will collect interest as soon as you take out the loan. For private loans, interest likely piles up from the beginning. Each loan is different, so be sure to check out the specifics.

Other questions to ask about interest: what is the interest rate?  Is the interest variable or fixed? With variable interest rates, be careful! The interest rates can start out low and increase at any point. With fixed interest rates, it will remain the same throughout the lifetime of the loan.

Fine print

With all big purchases, it’s important to read the fine print and save copies for your reference. When it comes to student loans, look for things like origination fees, which are administrative fees associated with processing your loan. Your loan may also require entrance loan counseling which will educate you on the terms of your loan, repayment, interest, etc. Be sure to pay close attention and save a copy of the information provided. You may also sign a master promissory note or loan contract. Read through the paperwork before completing it, and save a copy for your reference.

Your student loan balance

If your repayment terms don’t begin until after graduation, it’s easy to adopt an “out of sight, out of mind” mentality. When you take out loans, form the habit of tracking all that you’ve borrowed and accessing that information in real time. If you are offered more loan money than you need, it can be tempting to take it because it’s there, but don’t do it! Only borrow what you absolutely need. Your future self will be so thankful for this. For federal student loans, you are restricted to $57,500 for your undergraduate career. Even though you don’t want to get close to this limit, some students do. You don’t want to anticipate funding for next semester via federal loans, and find out you’ve reached your limit.

Repayment options

It may seem forever away, but eventually, you will have to repay your loans. Before the time comes, you’ll want to research repayment options available to you and determine your monthly payments. Keep in mind any loan forgiveness programs that may exist for you. This includes public service loan forgiveness or employers who offer assistance towards repaying your loans.

Being a savvy consumer will serve you (and your wallet) well. The financial aid office at your college is a great resource to educate yourself on student loans. They will also answer any questions that you have.