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8 tips for borrowing student loans for the first time

Experts share advice for making smart decisions when borrowing for college.

Around 40% of graduates regret how much they spent to attend college, according to a 2019 survey by Fidelity. With the average student graduating with around $35,000 in student loan debt, it’s no wonder many are second-guessing their college choices. To help you avoid becoming part of this statistic, we asked experts for their best advice for making smart borrowing decisions when it comes to student loans.

Figure out a college plan and stick to it.

“Many students go to college to figure out what they want to do, which in my opinion, is a mistake. This usually leads to wasted years, wasted borrowing and delayed future earnings to help pay down debt.

If you’re not sure about your what you want to do, consider attending community college or trade school for free or very low tuition to figure it out. If it turns out college isn’t right for you, you’ll end up saving thousands of dollars in tuition payments. Or if you nailed down your desired career path and need more schooling at a four-year university, you can transfer credits and get a college degree at a fraction of the cost.

If you do decide to go directly to college, I’d recommend having a clear major and career in mind. And try not to change majors, which could lead to extended loans and delayed repayments — increasing the overall cost of your student loans.”

— Daniel J. Mendelson, author of BYE Student Loan Debt: Learn How to Empower Yourself by Eliminating Your Student Loans

Read the terms thoroughly and ask questions before signing your loan documents.

“Taking on debt can be scary. There’s tons of complicated language and long paperwork that can make the process more difficult than it needs to be. Take all the time you need to understand your loans’ terms and conditions before you sign on the dotted line. If you have any questions, don’t be afraid to ask them. The more informed you are about your student loans — the better.”

— Logan Allec, CPA and founder of personal finance blog Money Done Right

Take out subsidized federal loans first.

“Parents and students should be sure to use any subsidized federal student loans available first. This is because the government pays the interest while you’re enrolled full time in school.

The savings speak for themselves. Let’s say you took out a $5,000 unsubsidized federal loan. At 6% APR, you’d pay $1,258 in interest over a four-year college career — or 25% of the original balance. And if you took five years to graduate, you’d owe $1,644 on that original $5,000 loan — or 33% more then you borrowed.”

— Todd Christensen, Accredited Financial Counselor (AFC) at Money Fit

Consider how much you’d need to borrow when picking the right school.

“Today, there are many schools in the US that cost over $70,000 a year. And costs only continue to rise every year. While some schools may pay off at that high price point for the right major and career, most won’t.

First and foremost, you should pick a school that meets your educational needs for the career you’re pursuing. Usually, this leads to dozens of options depending on your geographical preferences.

Once you’ve determined a list, find out which schools provide the most generous financial packages and the most cost-effective tuition for your needs.”

— Daniel J. Mendelson, author of BYE Student Loan Debt: Learn How to Empower Yourself by Eliminating Your Student Loans

Avoid using student loans for day-to-day expenses.

“It’s an open secret that many students use student loans to pay for lifestyle and consumer purchases, including dining out, used cars, pets and pet food, and road trips. If you had an inkling that doing so would add 25% onto the price of the purchase thanks to interest capitalization, you might want to reconsider using student loans to finance lifestyle expenses.”

— Todd Christensen, Accredited Financial Counselor (AFC) at Money Fit

Start paying back your student loans while you’re in school.

“Generally, student loan payments are due beginning six months after you graduate from college. But, that doesn’t mean that you can’t start paying at an earlier date. Even if you’re setting aside $10 to $20 a month for your student loans, it will leave you in better financial shape once graduation rolls around.”

— Logan Allec, CPA and founder of personal finance blog Money Done Right

Limit how much you borrow to your expected salary right out of school.

“A good rule of thumb is to plan to have no more student loan debt at the time of graduation that what you can realistically expect to earn your first year after graduation.

This isn’t the same as the career median income, which is generally what someone with 15 to 20 years of experience in the field will earn.

If you’ll likely earn $60,000 a year right out of college — quite possible for high-earning degrees like engineering — then you’d want to take out no more than $12,000 a year. The problem is that upper-level students tend to borrow much more than freshmen and sophomores, mostly because federal loan limits allow them to. Think twice before borrowing more than absolutely necessary.”

— Todd Christensen, Accredited Financial Counselor at Money Fit

Do your homework by comparing schools and student loans providers.

“Once you’ve determined a small list of universities you might want to attend, research which ones provide the most generous financial aid packages. This could include need-based funding or merit-based aid, such as scholarships for an extracurricular activity like sports if you’re an athlete.

Once you’ve determined your final loan needs after exhausting all aid resources, it’s time to shop around for the most appropriate loans. Sometimes that’s federal loans, but other times private loans could provide better interest rates — especially if you have a cosigner. Just be sure to opt for federal loans if you plan to use options like forgiveness or income-driven repayment plans.”

— Daniel J. Mendelson, author of BYE Student Loan Debt: Learn How to Empower Yourself by Eliminating Your Student Loans

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Name Product APR Min. Credit Score Loan amount Loan Term
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4.092% to 8.609% with autopay
$1,000 - $200,000
7 to 20 years
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CommonBond Private Student Loans
3.74% to 10.74%
$5,000 - $500,000
5 to 15 years
Finance your college education through this lender with a strong social mission and terms that fit your budget.
Edvisors Private Student Loan Marketplace
Varies by lender
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5 to 20 years
Get prequalified rates from private lenders offering student loans with no origination or prepayment fees.

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