What I Wish I Knew About Taking Out Student Loans For College

Student Loans and Repayment Plans

I remember restlessly laying in my bed the night before Freshman move-in day 5 years ago, dreaming about what the next chapter in my life would bring.

Sure I had visited my sister when she was in college, taken tours of many campuses, and talked to many older friends about it – but I had no idea what it would be like to experience so much freedom and responsibility after living at home for 18 years.

Needless to say, while laying in my bed that night, I wasn’t thinking about the upcoming late nights at the library, how I would juggle the various things that would surely fight for my time, or how much student loan debt I would graduate with…but maybe I should have.

You see, I was successful in college, but there are definitely some things I wish I was more prepared for that would have made both my time in college and post-graduation a little more easy.

Now that I’ve learned all of those lessons, I try to help students out who are about to embark on the “best four years of their lives” as much as possible. That’s why I’m here today, to try to help students and families learn some of the lessons that I learned the hard way, so they don’t have to.

Below, I will go over some of the most important things that I wish I knew before heading off to campus.

 

Understand How Student Loans Work and Create a Plan for Repayment

Nowadays, around 7 out of 10 students use loans to help pay for college. What’s even scarier? The average borrower has around $30,000 in debt at graduation.

Woah.

That’s a lot of money to start a young career with and many grads will actually have much more than this.

When I went into college, I knew I would have to use some student loan money, and I understood that I would eventually have to repay it, but that was pretty much the extent of my knowledge. My lack of knowledge led me to make some poor decisions with my money and miss out on saving opportunities.

It is absolutely crucial to know the ins and outs of student loans BEFORE accepting the money. At the very minimum, all borrowers should know what types of loans they have (federal vs. private), their interest rates, the repayment plans available after graduation, and how much their debt will cost them each month and over time.

By doing this, borrowers will be more conscientious of how they spend their student loan money (and other money) while in school, and it will hopefully inspire them to take some actions to reduce the need for student loans and reduce the total cost of their debt long-term.

What kind of actions? Glad you asked. Here are the most effective, in my opinion:

 

Apply for as Many Scholarships as Possible…Then Apply for Some More

There’s no need to take on massive amounts of student loan debt if you have earned a bunch of free money for college. That’s exactly what scholarships are – free money!

Though I could write a whole article about winning scholarships, the number one thing you can do is to simply apply for as many as possible. Try to find scholarships that use similar applications then you can reuse the same over and over with some minor tweaks.

One thing that I wrongly assumed while in college was that you could only apply for college scholarships while in high school. This is wrong! Many scholarships let college students apply, so don’t stop once you’re on campus!

 

Try to Find a Part-Time Job or do a Work-Study Program

I never had a job in college besides the summers, but I wish I did. Having a part-time job – even just 10 hours a week or so – can really help with weekly expenses.

Instead of using student loan money (which you will have to pay back with interest) for that night out with your buddies or that date with your crush from Calculus, you can use the cash you earned from your job or work-study.

For those of you who don’t know, work-study programs give students part-time jobs on campus and a portion of the money goes to college costs while some goes into the students’ pockets.

Having a part-time job in college may also help you…

 

Make Student Loan Payments WHILE in College

If you have federal student loans, which most are today, you will not be required to start repayment until six months after graduation. Even most private lenders will give you the option to defer payments until after graduation. This makes it very easy to set them on the backburner and completely forget about them.

One of the best ways to save on your student loan debt, though, is to make payments while in college.

How does this save money?

Well, for unsubsidized federal student loans and private student loans, interest will accrue while you are in college. This means that every month, a percentage of your principal is charged and added to your total balance. Then, each subsequent interest charge will be for even more.

If you make these interest payments, at least, then you will graduate with the same balance that you originally borrowed. If you can pay more than the interest, then by all means go for it! You will graduate with less debt than you started school with and I’ll be extremely jealous of your situation.

If you have subsidized federal student loans, the government is nice enough to pay the accrued interest while you’re in school, but that doesn’t mean you can’t make payments! Any payment you make will directly reduce your principal balance and you can graduate with significantly less debt than you started!

 

Start Building Credit in College

I didn’t take out my first credit card until I was a senior in college, so I didn’t have much of a credit history once I entered the “real world.” I learned the importance of this when I went to apply for an apartment postgrad and the landlord told me I had next-to-no creditworthiness.

Needless to say, I had to do some convincing to get him to rent me his apartment.

One easy thing that college students can do to help with their financial future is to take out a credit card and start using it wisely. That doesn’t mean make every purchase on it, even if you don’t have the money. That means make some small purchases every month that you know you can afford and actually making the monthly payment – completely and on-time.

This will help you start building credit so you can be eligible for things once you graduate such as better credit cards, auto loans, mortgages, student loan refinancing, and much much more.

 

Final Thoughts

If you have just recently entered college or will in the coming years, I wish I could trade places with you. It’s an amazing time with countless new experiences, friends, and opportunities, and I would do anything to go back.

Despite all of this awesomeness, and perhaps because of all of this awesomeness, it is also an easy time to lose sight of what is important and to damage your future – especially financially.

Be sure to know how you are paying for college, what you can do to help yourself out during college, and what commitments you will have after you receive your diploma. If you do this, you can walk around campus a little more confidently knowing that you are already a step ahead of most of your peers.

 

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Joe runs Paper Stackers – a personal finance blog about making, saving, and growing money. He graduated from college in 2016 and now lives and works in the New York City area.

 

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