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9 Things to Learn about Student Loans Before You Borrow

Student loans can be complicated, but understanding how they work could save you thousands of dollars.

Amy Fontinelle Amy Fontinelle Edited by Jared Hughes Updated March 14, 2023

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

With the high costs of attending a four-year college or university, you may need to finance at least part of your education. In 2021, the median balance of someone with student loan debt was between $20,000 and $24,999, according to the most recent data from the Federal Reserve.

It’s important to learn about student loans to get a handle on how complicated they can be. By understanding how this type of debt works, you’ll be able to save yourself from unpleasant surprises and pay less in student loan interest.

  1. Student loans should be a last resort
  2. Don’t borrow more than you can realistically repay
  3. Prioritize federal loans over private
  4. Not all private lenders are created equal
  5. Learn the details of loan costs and repayment
  6. Use loan funds for just the bare necessities
  7. Get to know your loan servicer
  8. Make in-school payments if you can
  9. Don’t stop learning about student loans — until your debt is paid off

1. Student loans should be a last resort

Don’t turn to loans as your first option to pay for school. You could substantially reduce how much you need to borrow by making choices like these:

  • Complete the FAFSA and submit as close to Oct. 1 as possible
  • Complete your state’s financial aid application
  • Complete the CSS Profile if you’re applying to any private schools that require it
  • Apply for scholarships and grants
  • Work after school and during the summer
  • Choose a lower-cost school, at least for your first two years

2. Don’t borrow more than you can realistically repay

If you don’t know what career you want to pursue, you might end up in a lower-paying job when you graduate — something that requires a college degree but isn’t highly specialized. Borrowing more than you need to earn your degree doesn’t make sense in this situation.

If you’re set on a career path and plan to earn a more specialized degree from a school with a strong program in that area, you could justify borrowing more. For instance, taking out $60,000 in student loans to major in computer science, where you can anticipate earning six figures after graduation, makes more sense.

Keep Reading: Student Loans: Only Borrow What You Need

3. Prioritize federal loans over private

If you have to borrow for college, you should use federal loans first to cover as much of the cost as possible. To qualify for these loans, you must fill out the Free Application for Federal Student Aid (FAFSA) for each academic year.

Only after you’ve exhausted your federal loans should you consider private student loans. What’s more, you should prioritize subsidized federal student loans over unsubsidized ones. Subsidized loans are less expensive because the government pays the interest your loans accrue while you’re in school at least half-time.

Good to know: Federal loans offer benefits private loans don’t. Benefits include income-driven repayment plans, public service loan forgiveness, deferment and forbearance when you’re in school or struggling financially, and discharge if you die or become totally and permanently disabled before paying off your loans.

Learn More: Subsidized vs. Unsubsidized Student Loans: Know the Difference

4. Not all private lenders are created equal

If you must take out a private loan, it’s crucial that you shop around to find the best deal. Unlike federal student loans, which all come from the same source and have the same interest rate (depending on the loan type and disbursement date), private student loans are available from many lenders.

Some private student lenders have more generous policies than others. One might discharge the loan balance when the borrower dies, while another might hold the borrower’s cosigner or estate responsible for the balance.

Perhaps most important, you might qualify for a better interest rate with one lender than another. One lender’s best rate might be 5%, while another’s is 7.5%. Finding the cheapest rate is easy and free, and it could save you thousands of dollars.

Credible lets you compare private student loan rates from multiple lenders, all in one place.

The companies in the table below are Credible’s approved partner lenders. Whether you’re the borrower or cosigner, Credible makes it easy to compare rates from multiple private student loan providers without affecting your credit score.

LenderFixed Rates From (APR)
Variable Rates From (APR)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.48%+10 5.98%+10
  • Fixed APR: 4.48%+10
  • Variable APR: 5.98%+10
  • Min. credit score: Does not disclose
  • Loan amount: $2,001 to $400,000
  • Loan terms (years): 5, 7, 10, 12, 15, 20
  • Repayment options: Full deferral, fixed/flat repayment, interest only, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: 0.25% to 1.00% automatic payment discount, 1% cash back graduation reward
  • Eligibility: Must be a U.S. citizen or permanent resident or DACA student enrolled at least half-time in a degree-seeking program
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 12 on-time principal and interest payments
  • Loan servicer: Launch Servicing, LLC


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.43%+1 6.02%+
  • Fixed APR: 4.43%+1
  • Variable APR: 6.02%+
  • Min. credit score: 720
  • Loan amount: $1,000 to $350,000
  • Loan terms (years): 5, 10, 15
  • Loan types: Any private or federal student loan
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay, loyalty
  • Eligibility: Available in all 50 states (international students can apply with a creditworthy U.S. citizen or permanent resident cosigner)
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: Firstmark Services


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.44%+2,3
5.09%+2,3
  • Fixed APR: 4.44%+2,3
  • Variable APR: 5.09%+2,3
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 up to cost of attendance
  • Loan terms (years): 5, 8, 10, 15, 20
  • Repayment options: Full deferral, full monthly payment, fixed/flat repayment, interest only, immediate repayment, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 24 months
  • Loan servicer: College Ave Servicing LLC

custom choice

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
3.65%+ 6.14%+
  • Fixed APR: 3.65%+ 11
  • Variable APR: 6.14%+ 11
  • Loan amount: $1,000 to $99,999 annually ($180,000 aggregate limit)11
  • Loan terms (years): 7, 10, 1511
  • Repayment options: Full deferral, immediate repayment, interest-only repayment, flat/full repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability
  • Fees: None
  • Discounts: Autopay11
  • Eligibility: Available to borrowers in all 50 states. Must be a U.S. citizen or permanent resident.
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Cosigner release: After 36 months11
  • Loan servicer: American Education Services
  • Min. income: $1

edvestinu student loan refinance

Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.0%+7 7.79%+7
  • Fixed APR: 7.0%+7
  • Variable APR: 7.79%+7
  • Min. credit score: 750
  • Loan amount: $1,000 to $200,000
  • Loan terms (years): 7, 10, 15
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, loans discharged upon death or disability
  • Fees: Late fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident and have a minimum income of $30,000.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 36 months
  • Loan servicer: Granite State Management & Resources (GSM&R)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.37%+8 6.85%+8
  • Fixed APR: 4.37%+8
  • Variable APR: 6.85%+8
  • Min. credit score: 670
  • Loan amount: $1,001 up to cost of attendance
  • Loan terms (years): 5, 10, 15
  • Repayment options: Full deferral, full monthly payment, interest only, immediate repayment, academic deferment, forbearance
  • Fees: Late fee
  • Discounts: Autopay, reward for on-time graduation
  • Eligibility: Must be an Indiana resident or a U.S. citizen attending an eligible Indiana school
  • Customer service: Email, phone, chat
  • Soft credit check: Yes
  • Cosigner release: After 48 months
  • Loan servicer: American Education Services


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.89%+ N/A
  • Fixed APR: 4.89%+
  • Variable APR: N/A
  • Min. credit score: 670
  • Loan amount: $1,500 up to cost of attendance less aid
  • Loan terms (years): 10, 15
  • Repayment options: Full deferral, interest only, immediate repayment, academic deferral, forbearance
  • Fees: None
  • Discounts: None
  • Eligibility: Must be a U.S. citizen or permanent resident and be making satisfactory academic progress.
  • Customer service: Email, phone
  • Soft credit check: Yes
  • Cosigner release: After 48 months
  • Loan servicer: American Education Services (AES)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
4.50%9 - 14.83%9 5.99%9 - 16.33%9
  • Fixed APR: 4.50%9 - 14.83%9
  • Variable APR: 5.99%9 - 16.33%9
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 up to 100% of school-certified cost of attendance
  • Loan terms (years): 10 to 209
  • Repayment options: Full deferral, fixed/flat repayment, interest only, academic deferment, forbearance, loans discharged upon death or disability
  • Fees: Late fee, non-sufficient funds (NSF) fee
  • Discounts: Autopay
  • Eligibility: Must be a U.S. citizen or permanent resident. Also available to non-U.S. citizen students (including DACA students) attending a school located in the U.S. who apply with a qualifying cosigner.
  • Customer service: Phone, chat
  • Soft credit check: Yes
  • Cosigner release: Borrowers can apply after graduation, 12 consecutive on-time principal and interest payments, and meeting certain credit requirements.
  • Loan servicer: Sallie Mae
Compare private student loan rates without affecting
your credit score. 100% free!


Compare Private Loans Now



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Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available | 10Ascent Disclosures | 1Citizens Disclosures | 2,3College Ave Disclosures | 11Custom Choice Disclosures | 6Discover Disclosures | 7EDvestinU Disclosures | 8INvestEd Disclosures | 9Sallie Mae Disclosures

5. Learn the details of loan costs and repayment

Many student loan borrowers don’t really understand how their loans accrue interest, and it ends up costing them.

For example: Let’s say your student loan accrues $200 in interest every month, but you only pay $100. Your lender will apply that $100 toward the interest you owe and add the remaining $100 to your principal.

None of your monthly payment will go toward your principal, and your balance will grow by $100. Next month, your loan balance will be even larger because interest will accrue on a greater amount of principal.

In other words, even though you’re making loan payments, you’re not making any progress toward paying off your loan. Instead, your loan amount is increasing and becoming harder to repay.

This is why periods of loan forbearance or deferment often aren’t the gift they appear to be. Your lender might allow you to skip monthly payments without adding late fees or reporting your account as delinquent to the credit bureaus. In the short term, this payment relief seems great, but in the long term, it can dig you into a deeper hole.

Federal student loans require you to complete student loan entrance counseling — and it’s a good idea to take this program seriously. What you learn could motivate you to pay off your loans as quickly as possible. For example, you might decide to pursue public service loan forgiveness or make more than the minimum monthly payment.

Below are a few key terms to be aware of:

Key term
Note
Fixed vs. variable ratesAll new federal student loans and some private student loans have fixed interest rates that don’t change. Private student loans typically have variable rates that fluctuate with the market.
Interest rate vs. APRAnnual percentage rate accounts for both the interest rate and fees on your loan. It’s a better measure of borrowing costs than the interest rate alone.
Origination, prepayment feesOrigination fees are lender fees for taking out a loan. Prepayment fees are lender fees for refinancing or otherwise paying off your loan early.
Loan termThe loan term is the number of years you have to repay the loan. Private loan terms vary per lender, but typically range between 5 and 20 years.

Federal loans have 10-year terms unless you choose a different repayment option, which can extend the term to 20, 25, or 30 years.
Grace periodThe is when you don’t have to pay interest on your loan. Subsidized federal loans have a six-month grace period after you graduate.
grace period
Deferment and forbearanceBoth deferment and forbearance allow you to not pay interest or principal for several months or longer due to a qualifying circumstance such as cancer treatment or economic hardship. With some federal loans, interest does not accrue during deferment.
Income-driven repayment plansFederal student loans offer payments that adjust up or down based on your income and family size. These plans give you more years to repay your loan and will forgive any remaining balance when the term ends.
Consolidation vs. refinancingConsolidating combines two or more federal student loans into one without changing the overall interest rate. Refinancing replaces one or more student loans with a new loan that has a different term and interest rate.

6. Use loan funds for just the bare necessities

If your lender has given you more money than you need to pay for school, you don’t have to spend it all.

You can repay the excess as soon as you realize you don’t need it. That way, you won’t have to pay interest on it and you’ll graduate with less debt.

7. Get to know your loan servicer

Your student loan servicer is the company you’ll make your payments to. It may not be the entity that loaned you the money, but it will be responsible for issuing monthly statements, approving or rejecting requests for deferment or forbearance, and reporting how much you owe and whether you pay on time to the credit bureaus.

Make sure you know who your servicer is, how to make your payments, and when they’re due. Get familiar with their website and where to find your statements.

8. Make in-school payments if you can

Many students never consider making payments on their loans while they’re still in school. But if you wait until after graduation to make your first student loan payment, you’re missing a great opportunity to save money.

Let’s say you’ve borrowed $10,000 with a 6% interest rate and a 10-year term. Your monthly payment would be $111, $50 would be interest, while $61 would be principal. Let’s also say your loan is not subsidized — in other words, the government is not paying your interest while you’re in school.

By just making the $50 a month interest payment — which you could earn from a couple of hours of tutoring — you would prevent your loan balance from growing each month. After four years, you would have paid $2,880 in interest, but you’d still only owe $10,000 in principal.

If you paid the full $111 each month, you’d only owe $7,000 at graduation. But if you paid nothing for four years, you’d owe more than $12,700.

9. Don’t stop learning about student loans — until your debt is paid off

You don’t have to become a statistic, another graduate who can’t afford to buy a home or who still has student loan debt at retirement.

If you understand how the different types of student loans work, how interest accumulates, and how you can get out of debt faster, you could very well pay off your loans in 10 years or less and enter your early to mid-30s with a clean slate.

Check Out: The Complete List of Student Loan Forgiveness Programs

About the author
Amy Fontinelle
Amy Fontinelle

Amy Fontinelle has been a personal finance writer since 2006. Her work has been published by Forbes Advisor, Capital One, MassMutual, Prudential, Reader’s Digest, The Motley Fool, Investopedia, International Business Times, Business Insider, Bankrate, and other outlets.

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