What To Know Before Taking Out Student Loans

What to Know Before Taking Out Student Loans

Student loans can be a helpful tool in making your college dreams a reality—but before you borrow, it’s important to understand what you’re signing up for. Here’s what you need to know:

1. Start with Free Money
Before you consider loans, explore scholarships, grants, and work-study options. These don’t have to be repaid and can reduce how much you need to borrow.

2. Understand Federal vs. Private Loans
Federal loans, offered by the government, usually come with lower interest rates and more flexible repayment options. Private loans, from banks or credit unions, may be helpful too, but often have higher rates and fewer protections.

3. Borrow Only What You Need
It’s tempting to take the full amount offered, but remember—you’ll have to pay it back, with interest. Stick to what covers tuition, books, and essential living expenses.

4. Know the Interest Rates and Terms
Not all loans are created equal. Pay attention to whether the interest is fixed or variable, when it starts accruing, and what the repayment terms look like after graduation.

5. Understand Your Repayment Options
Federal loans offer income-driven repayment and deferment options. Private lenders may not. Know what happens if you need to pause payments or change plans down the road.

6. Stay in the Loop
Keep track of how much you borrow, your loan servicer, and when repayment begins. Staying informed now will help you stay in control later.