4 Common Student Loan Mistakes

It’s been hard to come to terms with, but I need to face the facts: I’m not in college anymore. In fact, this January marks two years since I started repaying my student loans. I know, not the most exciting thing in the world, but important. So while I don’t claim to be a student loan expert, I have learned a lot of lessons along the way, mostly through trial and error. In hopes that you won’t make the same mistakes I did, here are some things I wish I had known before I started repaying my student loans:

  1. Girl with CalculatorI should have kept track of what I was borrowing.

Let’s be real. When you take out student loans to help pay for college, it’s easy to forget that that money will eventually have to be paid back … with interest. The money just doesn’t seem real when you’re in college, and I didn’t do a good job of keeping track of what I was borrowing and how it was building up. When it was time to start repaying my loans, I was quite overwhelmed. I had different types of loans and different interest rates. When I did eventually see my total loan balance, I was pretty shocked.

You can avoid this problem. Had I known there was a super easy way to keep track of how much you’ve borrowed in federal student loans, I would have been much better off. Just go to nslds.ed.gov, select “Financial Aid Review,” log in, and you can view all of your federal student loans in one place! How did I miss that?

  1. I should have made interest payments while I was still in school.

If you’re anything like me, you probably consumed your fair share of instant noodles while trying to survive on a college student’s budget. Trust me, I get it. But one thing I really regret when it comes to my student loans is not paying interest while I was in school or during my grace period. Like I said, I was far from rich, but when I was in college, I did have a work-study job and waited tables on the side. I probably could have spared a few dollars each month to pay down some student loan interest. Remember, student loans are borrowed money that you have to repay with interest and more importantly, that interest may capitalize, or be added to your total balance. My advice: Even though you don’t have to, do yourself a favor and consider paying at least some of your student loan interest while you’re in school. It will save you money in the long run.

     3. I should have kept my loan servicer in the loop

If you’ve recently graduated and haven’t heard from your loan servicer, make sure you check that your loan servicer has up-to-date contact info for you. When I graduated and moved into my first big-girl apartment, I forgot to change my address with my loan servicer. I found out that all of my student loan correspondence was going to my mom’s address. I hadn’t even thought to update my loan servicer with my new contact information. Don’t make the same mistake I did. Keep your servicer informed of address, e-mail, and phone changes.

  1. I should have figured out what my monthly loan payments were going to be BEFORE I went into repayment.

By the time my grace period was over, I had a decent idea of how much I had borrowed in total, but I had no idea what my monthly payments would be. I thought I was fine. I had started my new job and been paying rent and other bills for about six months. Then my grace period ended, and I got my first bill from my loan servicer. It was definitely an expense I hadn’t fully taken into account.

Don’t make the same mistake. Luckily for you, Federal Student Aid recently launched a repayment estimator that allows you to pull your federal student loan information in order to compare your monthly payments under different repayment plans side by side. That way, you know what to expect and can budget accordingly … unlike me.

I’ll be the first to admit that this whole process can seem a little overwhelming, especially when you’re new at it. But just remember, your loan servicer is there to help you. If you have questions or need advice, don’t hesitate to contact them.

Nicole Callahan is a new media analyst at the Department of Education’s office of Federal Student Aid.

17 Comments

  1. Thanks for enlightening us into avoiding this types of mistakes. A loan is an investment and must be taken as such and the funds should be managed in those terms.

  2. I am a parent with two well-educated sons with over $200K in student loans. An
    average middle class family paying our share of taxes.
    Number of issues to be addressed:
    I. Any reason my sons cannot get the best education in their fields? Not the likes
    of the rich, super rich and power brokers, sending their kids to Harvard, etc.
    II. Without student loans it is not possible to get on the ” upward mobility” in
    life. Not even getting close to the class of the rich. There is a clear class
    separation within the system, to keep the middle class and down in a
    stagnant and frozen state. Owned as workers but never to own.
    III. By denying student loans, keeping interest high, accruing while in university,
    profiteering by lenders on the backs of struggling and poor students.
    IV. Does anyone within the governmental or private sector care to resolve
    this issue? America wonders why not enough highly educated and trained
    innovators exist. The Chinese and Indians are way ahead of USA. We
    Rank No.36 in the world in math and science. “Intentionally or accidentally”.
    V. Solution yes: Stop profiteering on student loans, do “NOT” charge interest
    when students in university, provide low interest rates (same interest rates
    banks charge when loaning to each other). Those ignorant, please check
    out the 400% profit made by the banks.

  3. Personally, I get sick and tired of people being “career students”. Always in school so they can live off student loans and postpone actually getting a job. The icing on the cake is when they never pay back the student loans! I consider it a crime.

  4. Skip college, there aren’t many jobs available that will cash flow student debt and allow you to enjoy a middle class lifestyle.

    • Oscar, that is bad advice I think. Skipping college is a life long crippling event. I waited until I was 40 to actually go back for my degrees. I had a small tech school diploma but no degree, and actually hit a ceiling as to where I could go in my industry. It was either IT consulting for the rest of my life, or have a Bachelor’s degree to get an interview. Once I received my degrees, my pay increase in two years has been $20,000 per year. My total loan amount is approximately 35k, with payments in the range of $250.00 per month. A couple of things should be changed in the system.

      #1. No pell grant money should ever be disbursed to a student with student loans. Many colleges hand out this pell grant money because they use loan proceeds to satisfy the tuiton cost. The remainder is then refunded to the student. This is a mistake. It should be kept in the student account until more money is required. This money should be used first before loan proceeds.

      #2. Student loans should be based on the major chosen. Granted in the first two years, this could change drastically, but allowing a liberal arts major to rack up 40k in loans is bad business. Loans (and tuition in my opinion) should be based on the major chosen.

      #3. When you graduate college, if you think you will immediately be able to pay back a 40k loan, plus your housing,car,food bills with an entry level job you’re delusional. This should not stop you however. Sometimes you have to work a second job to make your bill payments. Even delivering pizzas or working at the golden arches part time will net you enough to pay your student loans each month.

      • RE: #2 Right. We want to discourage people from continuing in the liberal arts (which can actually lead them into many different careers) and only push for engineering and technical degrees. That way, we’ll be able to create more machines to do everything for us so that future generations don’t even need a brain.
        I agree that tuition costs are ridiculous, but a student should not have their opportunity to continue their education limited because someone else decides it’s not a worthwhile field. Many parents already provide that pressure for their children.

  5. Here are some problem areas I have had with my loans:
    Credit card companies are now required to send information with monthly bills showing how much you would save and how much faster you would pay off a loan if you paid a bit more every month. Since I consolidated my loans, I have tried many times to get this info from my servicer but with no luck.
    Also I am now of retirement age but wonder how much longer I need to pay. (I went back to grad school and have 2 masters degrees which is why I still have student loans.)
    Furthermore, I was a teacher but only taught fulltime a couple of years until I was unable physically (although I do not officially qualify for “disability”). I have taught a lot as part time or substitute but none of this qualifies. Any suggestions?

    • If you have not used your three years of forbarance, you could use that option. All federal student loans can have up to three years of forbarance used when the lender basically gives you a grace period of no repayment, no questions asked. This is what I did while I worked as a substitute. You can use your forbarance in one month to three year intervals, you choose. However, unsubsidized loans will still accrue interest. This would buy you some time until you are old enough to collect your retirement benefits.

  6. Additionally I would like to add, to make things easy for understanding the multiple letters. If you have different loans to consolidate them all into loan with Direct Loan Consolidation and make one payment and possibly get a slight decrease in intrest rate dor doing so.

  7. Might it be more beneficial to use the money you would have applied to the interest each term and instead have applied that to the principle. Perhaps one step better may be to use the money you would have applied to the interest to instead reduce the amount of money you would need to borrow for the next term.

  8. I couldn’t understand all the letters I was receiving from the loan companies. Why couldn’t it say in plaine English Total amount owed is blank. The hundreds of letters and bills were very confusing. I finally went on federal student aid and found out….

  9. ^ Thanks for the economic lesson Diane. Maybe you should take into account the number of people who we’re not taught by their families to do these “common tasks.” As well as, I applaud you for being able to deduct that when your borrow money you have a responsibility to pay it back.

  10. These are definitely some lessons I wish I would have learned before I graduated college, especially paying on the interest. I think too often college students operate under the “I don’t have to worry about my loans until after school” line of thinking. Another piece of advice I have is to pay more than the minimum, even if it is just a few extra dollars.

  11. Maybe this supports the idea of teaching “home economics” or “personal finance” in high school because if a college graduate can’t do these common tasks, then how can they expect to hold a responsible job. Let’s get real…when you borrow money…it is your responsibility to repay it.

    • ^ Thanks for the economic lesson Diane. Maybe you should take into account the number of people who we’re not taught by their families to do these “common tasks.” As well as, I applaud you for being able to deduct that when your borrow money you have a responsibility to pay it back.

    • Diane… people don’t know what they don’t know no matter how educated they are.

      I sewed a stuffed teddy bear in home ec class. Not sure if that would be helpful. I think financial aid offices need to do a better job at breaking down information for students.

    • I don’t think it should be a requirement of high schools to teach personal finance, although that would have been very helpful… Honestly, it’s about reading every student loan letter you get in the mail, actually doing those financial loan surveys/tests that my school required me to take when receiving loans. You can also take out less money that is offered to you… And if later on in a semester you end up needing that money the loan can still be available (at least it was for me). It’s all about figuring out your budget and spending the time reading documents sent to you in the mail. But in all honesty I think that some young college kids are in denial until they have to make that first payment.

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