Tips & TrapsGet Started
Our Tips and Traps guide helps you make important decisions about managing your student loans. This page is divided into sections based on your current situation, providing you with practical information that can help secure your financial future. Check back regularly as your situation changes.
Click the scenario that best describes you:
Current High School or College Student
Borrow smart! Student loans can be an important part of reaching your educational goals but too often students borrow more than they really need. Spending student loan funds on non-educational expenses leads to over-borrowing and can set you up for failure in repaying your debt. Resist the urge to borrow the maximum amount you are eligible for; your financial health and success depends on it!
Missing payments, making partial or late payments, and deferring payments can all negatively impact your credit rating. Ever-increasing amounts of student debt can also limit the availability of additional credit lines you may need in the future.
Student loans can help you build a positive credit history. Making your monthly payments in full and on time and paying your loans off early will improve your credit score. Below are the components typically considered in calculating your credit score (also known as your FICO score).
You've been repaying your student loans and have recently returned to school. Because you are in school, your Servicer may automatically put you on an “in-school deferment”.
While you have an in-school deferment, interest continues to accrue on unsubsidized loans (but not subsidized loans) and will be capitalized when you enter repayment. Although you were receiving bills from your servicer on your loans prior to going back to school, you will no longer be required to make payments while in deferment.
If you are able to make payments while in school, communicate with your Servicer (the contact information is in the Loan Records section of your Loanlook account). Confirm that you want to continue to pay on your previous loans and that you do not want to have an in-school deferment for those loans. Confirm that you will continue to receive monthly bills. Complete, return, and save a copy of any required forms. Document your conversation in the Loan Records section of your Loanlook account.
Paying at least the monthly interest on your unsubsidized loans while you're going to school will save you money in the long run by not allowing that interest to be capitalized when you enter repayment. In order to do this, you need to communicate with your Servicer (the contact information is in the Loan Records section of your Loanlook account). Be sure to get detailed instructions on how to pay the interest, including where to send your payment and what information to provide with your payment. Complete, return, and save a copy of any required forms. Document your conversation in the Loan Records section of your Loanlook account.
Choosing between private student loans (generally available through a bank or other financial services company) and federal student loans (available through the government's Direct Loan program) is an important decision. Generally, the terms of federal student loans are more favorable, which can save you interest over the life of the loan. In addition, there are generally more repayment options available to federal loan borrowers should the Standard repayment plan not work for you.
Time really is money when it comes to borrowing. One of the best ways to control the total cost of financing your education is to graduate and do so on time and on budget. Leaving school without your degree can also leave you without the means to repay your loans. If life and work circumstances make continuing your education difficult, consider moving to half-time enrollment (instead of ceasing your education entirely). That way, you can maintain your in-school status and continue to make progress towards your degree completion.
Your career plans need to play a critical role in your borrowing decisions. Be honest with yourself about what kind of job your degree will help you get. Consider where you'll be living – some places are far more expensive places to live than others – and factor in your life plans such as getting married, buying a home, and having children. As a general benchmark, plan on applying at least 10% of your take-home pay towards your loans. Use the Affordability and Repayment Calculator in the Loan Tools section of Loanlook to see what geographic areas pay the most for your projected career.
You're borrowing now to finance your education. You're not tracking your loans because you're focused on school and will worry about repaying them after graduation.
This approach can lead to a big (and unpleasant) surprise down the road. While you are in school, interest accumulates on any unsubsidized or private loans. This interest will capitalize when you enter repayment, increasing your outstanding principle balance.
Use your Loanlook account to monitor your loans and understand your total cost of repayment. Borrow only what you absolutely need and consider paying at least the interest while you are in school.