- Borrow only what you need.
- Exhaust other types of aid before using alternative (private) loans.
- Read your promissory note (know what you agreed to).
- Pay on time (consider paying early).
- Keep in touch with your loan servicer.
- Pay attention during entrance/exit counseling.
- Look up all of your federal loan information online.
- Stay organized.
Remember, you MUST pay back your student loans. So borrow only what you need to cover your costs, not what you are eligible to receive. How much student loan debt you should borrow is a very personal decision. Keep in mind your employment and career prospects: The rule of thumb is to not borrow more for your education than you intend to make in your 1st year out of school. Curious about the salary range is for your future career? Check out salary.com.
An average monthly student loan payment is generally the equivalent of a car payment or rent on a modest apartment. Factor your student loan payments into your budget after you graduate. Be an informed consumer, and don't get in over your head.
If you need additional funds after obtaining financial aid through grants, scholarships, and federal loan programs, consider alternative (private) loans as a last resort.
Alternative loans may have higher interest rates, more fees, and less flexible repayment options than federal loans. They also require a credit check and may not provide the benefits of federal student loans. Loan terms and limits vary substantially by program and lender, so make sure you know your responsibilities before you commit to an alternative loan.
Before you receive your student loan, you must sign a promissory note. The promissory note is a "promise to pay" contract between you and the lender that is providing your loan money (if you have a federal loan, the lender is the federal government). This legally binding document specifies your responsibilities (called the "terms and conditions") for paying back the loan.
Because your responsibilities may vary according to the type of loan you receive, be sure to read the promissory note before you sign it, so you know what is expected of you. And pay the loan back per this agreement. After all, you promised, and you will be held accountable.
You must pay back your loan on or before the scheduled due date each month. Direct Debit is the most convenient way to do this, although other payment options are available.
If you don't know your payment schedule, call your servicer or review your account information on their website. If you do not make your loan payments on time, you may incur additional fees or, even worse, go into default.
If you want to save some money in the long run, consider paying interest while you are in school or paying amounts that are larger than those due. When you pay early like this, there is less time for interest to accrue, meaning that you will have less to pay over time.
Your loan servicer is not your enemy. Student loan professionals are accustomed to talking with borrowers who are having financial difficulties and can't pay their loan right away. So, JUST CALL THEM and explain. They'll work with you. You are not alone.
You are obligated to notify your loan servicer in writing if any of the following events occur at any time before or during the repayment of your loans:
- Your address, telephone number, Social Security number, or email address changes.
- Your name changes (for example, if you get married).
- Your enrollment status changes, for example, if you graduate, withdraw from school, or fall below half-time status. (Half-time is usually a minimum of 6 credit hours, but every school is different.)
- You transfer to a different school.
- Your employer or employer's address and telephone number change.
- You experience any other change in status that could affect your loan.
Don't know who services your federal loans? Sign in to NSLDS.ed.gov to find out. Keep track of all of your loan servicers (PDF), so you'll know how to contact them when you don't have the internet at your fingertips.
If you take out a federal student loan, the government requires that you participate in entrance and exit counseling. Entrance counseling takes place around the time you sign your promissory note, before the government distributes your loan money. Exit counseling occurs at the end of your education—that is, when you graduate, withdraw, or drop below half-time status.
Pay attention. The purpose of entrance and exit counseling is to educate you about your loan. It speaks honestly about what you can expect throughout the life of your loan, provides contact information (name, phone number, and email address) if you need help coping with student loan debt, and discusses the potential consequences of default.
Entrance and exit counseling is unique to every school. You may receive your counseling online or in person. And there may be quizzes to test your knowledge.
The U.S. Department of Education centralizes all federal student aid information through its National Student Loan Data System (NSLDS). This online tool includes information from your school, lenders, servicers, and guarantors. Sign in to view details about your federal loans, as well as your history of federal student aid. You will need your PIN (personal identification number) to access this information.
Remember to keep copies of all of your loan documents, including:
- Your FAFSA® (Free Application for Federal Student Aid)
- Promissory notes
- Your loan repayment schedules
- Records showing when loan payments were received
- Records of loan payments you made, including cancelled checks and money order receipts
Keep copies of anything you do in writing, including requests for deferment or forbearance.
If you call a lender/loan servicer, make a note of the date and the person with whom you spoke. And always keep on hand the most recent names and addresses of the lender, the loan servicer, and the guarantor of the loan.
- Repaying your student loan on time may help improve your credit score.
- When it's time to pay back your loan, expect the minimum monthly payment to be at least $50.
Test Your Knowledge
Both George and Mary borrow $11,625 in unsubsidized loans at 6.5% interest (standard 10-year repayment). About how much will George save if he pays interest while he's in school?
If George pays interest while in school, not only will he save $971.33 more in total interest than Mary ($6,389.56 vs $7,360.89), his monthly payments after graduation will be only $134.20 vs. Mary's $158.22.