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Student Loans: Only Borrow What You Need

Understanding how federal and private student loans work is vital — even before you decide how much debt is enough or too much.

Kathryn Pomroy Kathryn Pomroy Edited by Jared Hughes Updated February 16, 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."

About 54% of students earning a bachelor’s degree took out student loans and graduated with an average of $29,100 in private and federal student loan debt, according to a 2022 College Board report.

It’s best to only take out the minimum student loans you need so you can comfortably afford the payments when you leave school. Find out how to determine which loans are best and why it’s important to minimize your borrowing to cover both school and secondary expenses.

  • Which loans are right for you?
  • Why students shouldn’t borrow more than they need
  • 7 ways to pay for general living costs of college

Which loans are right for you?

Student debt can be made up of either federal and private loans, or both. A mix of student loans carries different interest rates, terms, and repayment options. Since federal student loans offer several protections and benefits not seen with private loans from banks or other financial institutions, it’s generally best to max out federal loans first.

Federal student loans

These loans are dispersed by the federal government through the U.S. Department of Education’s Direct Loan Program. Federal loans provide fixed interest rates, and you must repay them once you leave school or attend less than half-time.

There are four types of Direct loans available:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans

When you apply, you must meet the requirements set out in each type of loan.

Federal loans also include a loan option (parent PLUS) for parents of dependent students. Before accepting federal student loans, take a look at the pros and cons.

Pros

  • Federal loans offer a fixed interest rate, meaning your rate won’t change.
  • Federal loans do not generally require a credit check, so you may still qualify even if you have little or no credit history.
  • When you qualify for subsidized student loans, the federal government pays the interest on your loan while you’re still in school.
  • There are several repayment options to choose from once you graduate, one being income-driven repayment plans based on your annual earnings.

Cons

  • Not all students qualify for federal subsidized student loans.
  • Like any other type of loan, student loans must also be repaid. The debt relief program is currently paused, but debt deferment has been extended until 60 days after June 30, 2023.
  • The federal government caps how much federal money you can borrow. That’s why it’s important to research other types of financial aid as well.

Read More: Student Loan Limits: How Much in Student Loans You Can Get

Private student loans

Because there is a limit on how much federal student loan money you can borrow, (which may not cover the total cost of attendance), many students also take out private student loans.

Private loans are provided by banks, some credit unions, and online lenders. If you need to borrow from a private lender, you should consider several important pros and cons.

Pros

  • Some private lenders let you borrow up to 100% of the cost of attendance, meaning no cap.
  • Private student loans may offer a lower interest rate than loans with fixed rates. This is especially true when interest rates fall.
  • Private student loan lenders generally don’t require you to maintain full-time enrollment to be eligible for loans.
  • You may qualify for incentives, like loan deferment, if you lose your job, or a lower interest rate if you set up autopay for your loans.

Cons

  • Private lenders are not required to offer plans that are based on your income, so if your earnings dip, you will likely still be required to make your agreed-upon payments.
  • Private lenders typically perform a credit check, so if your credit isn’t up to par, you may need a creditworthy cosigner on your loan.
  • If interest rates increase, you may end up paying more interest on your loan.

If you need to take out private student loans, visit Credible to compare private student loan rates from various lenders in minutes.

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
4.62%+10 5.86%+10
  • Fixed APR: 4.62%+10
  • Variable APR: 5.86%+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
4.99%+1 5.1%+
  • Fixed APR: 4.99%+1
  • Variable APR: 5.1%+
  • 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
4.74%+2,3
4.74%+2,3
  • Fixed APR: 4.74%+2,3
  • Variable APR: 4.74%+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%+ 5.67%+
  • Fixed APR: 3.65%+
  • Variable APR: 5.67%+
  • Min. credit score: Does not disclose
  • Loan amount: $1,000 to $99,999 annually ($180,000 aggregate limit)
  • Loan terms (years): 7, 10, 15
  • 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: Autopay
  • 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 months
  • Loan servicer: American Education Services
  • Min. income: Does not disclose

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
7.52%+7 6.99%+7
  • Fixed APR: 7.52%+7
  • Variable APR: 6.99%+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 5.86%+8
  • Fixed APR: 4.37%+8
  • Variable APR: 5.86%+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
4.509 - 14.83%9 5.49%9 - 15.83%9
  • Fixed APR: 4.509 - 14.83%9
  • Variable APR: 5.49%9 - 15.83%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
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Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available | 10Ascent Disclosures | 1Citizens Disclosures | 2,3College Ave Disclosures | 7EDvestinU Disclosures | 8INvestEd Disclosures | 9Sallie Mae Disclosures

Why you shouldn’t borrow more than you need

Student loans are meant to help pay for your education expenses. But many students also often rely on the money to fund other wants and needs while in school. It’s also easy to think of repaying your student loans in future tense — in other words, after you land that high-paying job.

But instead, you may find yourself starting your career in a low-paying job, and making student loan payments you can barely afford. That’s why it’s imperative to only take what student loans you need to fund your education.

Keep in mind: Serious consequences can occur if you don’t repay your debts. Your wages can be garnished, you will lose out on tax refunds, you will not receive federal loan benefits like income-driven repayment plans, and you could be sued for the loan balance. Your credit will also take a serious hit, making it difficult to qualify for any credit in the future.

7 ways to pay for general living costs of college

Student loans cover your education costs, such as:

  • Tuition
  • Room and board
  • Common student fees
  • Transportation
  • Your computer
  • Books
  • Supplies

That means you’re financially responsible for noneducational activities, like attending a concert off-campus, the occasional restaurant meal, and other everyday living expenses. So, you may have to turn to other options to pay for these secondary costs. Here are a few to consider.

1. Income share agreements

If you’ve maxed out your student loan options, you might consider an income share agreement (ISA). With an ISA, you receive funding for school if you agree to pay back a percentage of your post-graduate income.

The amount you repay each month depends on what you earn after you graduate. If you have a high-paying job, you may actually repay more with an income share agreement than you would with a private loan.

For example: If you have an ISA agreement of $10,000 with a 6% income share percentage, a four-year repayment plan, and your annual income in your new job was $100,000, your monthly payment would be $500 and you would repay a total of $24,000.

In contrast, if you borrowed a $10,000 student loan with an interest rate of 10.00% and repaid it over a 10-year term, your monthly payment would be $132, and you would pay $15,858 total.

2. Work-study programs

Federal Work-Study programs are administered by your college or university, but these programs aren’t available in all schools, so check with your financial aid office to see if your school participates. If your school offers work-study, you might find a qualifying position via its job database.

Good to know: What you receive in federal student aid will determine the total number of hours you can work each week, which will also determine how much you can earn.

3. Part-time jobs

Although you may be buried in schoolwork, you might supplement your loans with a part-time job. Your campus career office may have resources to help you with your job hunt. Also, check out job and networking websites like:

  • FlexJobs
  • Glassdoor
  • GetWork
  • LinkedIn
  • SnagAJob
  • UpWork

You might also consider a student research position or a position as a lab or teaching assistant. Likewise, some companies offer tuition and living expense reimbursement for part-time employees. When applying for a part-time job, ask your new employer if this is an option.

4. Apply for a paid internship

Internships can be a good way to gain work experience and build your resume. While some internships are unpaid, many are paid. A paid internship might offer you a chance to earn a little extra money for secondary expenses — and build skills that you can use in a future career.

5. Grants and scholarships

Merit-based scholarships do not generally have to be repaid. Likewise, most grants, such as the Federal Pell Grant, also don’t need to be repaid. However, there are eligibility requirements you must meet.

Keep in mind that scholarships and some grants have deadlines and may require you to write an essay and complete an application. So, it’s important to apply early to find the best selections and comfortably complete the requirements. You can find a list of scholarships and grants on the College Scholarships website. You can also check with your school’s admissions department.

6. Apply for a tax credit

If you qualify, you or your parents may be eligible to claim the American Opportunity Tax Credit (AOTC) for up to $2,500. However, you must be:

  • Enrolled in a degree program at least part-time
  • Still in your first four years of college
  • Not a past AOTC recipient for more than four tax years
  • Clear of any felony drug conviction

7. Dip into your savings

Although using your savings — especially without a plan to pay it back — is not the first option you should choose, it may help pay for secondary expenses. If you have a stable job and the income to pay back what you borrow out of your savings, it might be a more viable option.

Keep Reading: How to Use Student Loans for College Living Expenses

Jimmy Karnezis has contributed to the reporting of this article.

About the author
Kathryn Pomroy
Kathryn Pomroy

Kathryn Pomroy has been a personal finance writer for over seven years with work featured on LendingTree, Intuit/QuickBooks, FundThrough, insure.com, finder.com, NextAdvisor, and more.

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