How to Borrow Student Loans Responsibly

Facebook icon Twitter icon Print icon Email icon
Kristen Kuchar

By Kristen Kuchar

January 23, 2020

When you hear about the student loan crisis and the more than a trillion dollars of student loan debt, it is likely you could be scared to borrow student loans. While a debt-free education is ideal, in many cases, student loans are necessary to pay for college (more than two-thirds of college students graduate with student loan debt). There is a positive side to student loans. If you borrow smarter, loans help you earn a college degree, which could result in a bigger income, more job security, a ticket to a career you love and enough money to repay your student loans.

Here is how to borrow student loans in a smarter way:

Exhaust all other resources first. 

Before you borrow one cent, do everything you can to avoid loans. You should first:

  • Fill out the Free Application for Federal Student Aid. The FAFSA is how you apply for financial aid from the government and universities. This includes grants, scholarships, federal student loans and student employment (also known as Federal Work-Study).
  • Apply for grants and scholarships. Grants and scholarships are types of gift aid, which is free money that you don’t have to pay back.
  • Think outside the box. There are many ways to cut costs of college, including attending a college with free tuition, attending a college with a no-loan financial aid policy, getting a job that offers tuition reimbursement or working at a college that offers free or discounted tuition as a perk. If your parents or grandparents are alum of a college, you might be able to get a legacy discount.

Consider the cost of your college. 

Attending an out-of-state or private college is going to cost you a lot more than an in-state public college. Choosing an affordable college is a vital way to keep your student loan debt manageable.

Consider your potential income. 

When borrowing, it’s important to be realistic about what you will earn upon graduation. Experts recommend borrowing no more than your anticipated first year’s salary.

Understand how student loans work. 

Every dollar you borrow, you will need to pay back, plus interest. Every loan has an interest rate, either fixed (will stay the same) or variable (could change). You pay interest on that loan in return for borrowing it. Thus, you want to get the lowest possible interest rate when borrowing a loan.

You also need to understand the severity of student loans. Once you graduate and are living on your own, you’ll need to budget and include monthly student loan repayments. Dealing with student loan debt means you might not have extra money to go out to dinner with friends, travel or pursue other savings goals (like buying a house or saving for retirement or a wedding).

Use our Student Loan Calculator to determine the monthly loan payment and total payments on your student loans.

If you miss a student loan payment or stop paying your student loans, this will impact your credit. Not paying your student loans could result in wage garnishment and losing a professional license in some states. They can even seize your income tax refunds and lottery winnings.

On the bright side, if you are able to keep your debt reasonable and manage payments once you graduate, student loans can be a worthwhile investment.


Choose federal loans first.

Federal student loans come with many benefits that a private loan doesn’t. Unlike private student loans, federal student loans offer the possibility of forgiveness depending on your career choice as well as income-driven repayment plans. You may also qualify for deferments (a period where you aren’t required to make payments) during times of unemployment or economic hardship. Federal loans also generally have a lower fixed interest rate.

Compare private student loans.

If you need to borrow private student loans, compare private student loan lenders – including interest rate, loan terms and other benefits (i.e. do they offer the a cosigner release or no late fees).  

Borrow only what you need. 

Just because you’re offered a certain amount of loan money, doesn’t mean you need to accept all of it. Only borrow what is absolutely necessary.

Keep costs as minimal as possible while you’re in college. 

First, consider your big costs. Can you live at home to save money during college? What about selling your car if you’re living on campus and don’t need it? (It could save thousands per year). With every purchase, ask yourself, do I really need this? If no, hold off. It’s not worth using student loan money for anything that is not necessary. If yes, ask yourself, how can I save money on this? For example, you may need a textbook for a class, but can you borrow it from the library for free? If not, can you buy it used and then resell it at the end of the semester? 

Create a monthly budget and stick to it. 

Don’t spend your money on going out to restaurants, ordering take-out, new clothes, gadgets and vacations. Use your meal plan if you’re in the dorms or cook at home if you’re in an apartment.

Choose your classes wisely. 

Taking courses you don’t need to graduate can cost you. Meet with your advisor regularly to make sure you aren’t enrolling in a class that doesn’t count towards your graduation requirements.

The same goes with switching majors. Many students change majors, which is completely natural, as deciding what to do with the rest of your life could be a little tricky. However, do your best to avoid this. If you’re not solid on what your major is, focus on general education classes. In some cases, you might be able to test out of a certain class, which is a huge savings as well.

Get a job. 

If you qualify for work study, see what opportunities are available at your college. Every dollar you earn while in college is a dollar less you owe.

Make payments while you’re in school, if you can. 

Student loans let you make full payments, interest-only payments or a fixed payment (such as $25 per loan) each month.

A good place to start:

See the best 529 plans, personalized for you