Becoming Loan Savvy: Student Loans

Becoming Loan Savvy: Student Loans

Aug 23, 2019 8:00:00 AM

Perhaps when you were in college you had to quickly sign for a loan so that you could get in to school.

There wasn’t really time to read all the tiny fine print because you had to hurry to class, and all student loans are basically the same anyways, right?

Man signing a loan agreement paper

Then four years later you get a notice in the mail that you owe your first payment on your student loan… which is $50,000 at a 12% interest rate?!? How could that happen? What should you do now?


Student loans are so commonplace today that many of us don’t think twice about them. Many Americans do not understand the loans that they are signing for, but these same loans can have significant power over their lives.


Student loan debt can affect one’s ability to purchase a home or their eligibility for a car loan. It might even make someone hesitant to accept certain jobs or change jobs due to uncertainty about being able to afford the loan payments.


Woman viewing a computer screen and biting down on a pencil in stress

With school just around the corner, this is the perfect time to be thinking about your future with student loans. If you have to use loans to pay for school, there are ways to make educated choices to ensure you do not get hit with an unexpected, astronomical bill when you graduate.


If you already have loans, it’s not too late to discover ways to get them under control and keep them from controlling your choices. Time to get loan savvy!


Interest rate


The first thing to understand is the interest rate of the loan. Just like your money can grow significantly through the power of compounding interest, a loan with a high interest rate will cost you considerably more over time. Scrabble blocks spelling out "high interest rate"

If your loan has an interest rate of 12%, you will have to make higher monthly payments or pay over a longer period of time compared to the same loan with a 5% interest rate.


We all have better things to do with our money than to pay extra interest bills! If you are taking out a new loan, avoid high interest rates.


If you already have a high-interest-rate loan, you might be able to renegotiate the interest rate or move the loan to a new company for a lower rate.


Loan Type


Did you know that some federal loans are forgivable? Individuals who spend 10 years working in public service while paying on their loans consistently (120 consecutive payments) might be eligible to have their federals loans forgiven.

If you plan to work in public service after you graduate, this is a path to consider. If you have private loans, these might not be forgivable, but you can consolidate them to make them more manageable.

Hand erasing the word "debt" from a chalkboard

In addition to looking for a way to lower your interest rate, you might consolidate your loans to eliminate confusion.


If you accumulated 10 loans of various amounts, from various companies, over 4 years at school it is confusing to keep track of the interest rates and due dates!


This is a good time to consolidate all your loans into one – with the lowest possible interest rate of course!




It might seem like an obvious decision to ask your parents to co-sign your loan with you. However, this also has the potential to create family tension. If you are unable to make a payment, this doesn’t just reflect badly on you – it also affects your co-signers and their credit and future.

man and woman discussing co-signing in a coffee shop

To be sure everyone is on the same page, before adding a co-signer to your loan make sure you have set the ground rules: What is the safety net if you are unable to make a payment? How will you pay your parents back if needed?

If you already have co-signers on your loan and you have made your monthly payments, you could potentially re-negotiate to have them removed!


This could be a financial relief for your parents while also putting you in control of your money.

It’s never too early or too late to think about your financial future.


Since student loans will play a huge role in your life, now is the perfect time to become loan savvy and make sure you are getting the best loans or renegotiating any existing ones if needed.


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