Using Student Loans Responsibly

Student loan debt is a hot-button issue for many. If you ask your older friends, family members, and people in your community, you’ll likely get conflicting advice about whether college is worthwhile and how to approach paying for classes—and student loans are often a big part of that conversation.

Taking on such a major debt isn’t something to do lightly. But it’s not something to avoid out of hand, either. When approached intentionally, with thoughtful planning, student loans can serve your education without derailing your future.

Know Your Why

Before taking out loans, it’s helpful to step back and assess your plan for college and beyond. What kind of career can you actually see yourself in? What job opportunities are available for graduates with the major you’re interested in? Are you going to college because you truly want the degree, or are you feeling outside pressure? Self-reflection and honesty can help guide you in shaping your future.

If you’re not sure what you want yet, it might be worth starting with a two-year degree and then reassessing. There are also trade school options and career paths that have nothing to do with advanced degrees, and all of them can lead to fulfilling futures. Or maybe you have your heart set on being a doctor and are excited about the prospect of dealing with patients all day and being on call. That’s okay too! What matters is that you’ve given it some thought so you can commit with a plan, rather than making long-term decisions based on limited information.

Understand Your Options

There are multiple types of student loans, including federal and private options. Generally speaking, federal loans will offer lower fixed interest rates, more flexible repayment options, and borrower protections that private loans do not.

Federal Loans

There are two main types of federal loans for undergraduate students:

• Subsidized Loans: These are awarded based on financial need, which is determined by your Free Application for Federal Student Aid (FAFSA). If you qualify, the federal government covers the interest while you’re in school, during a six-month grace period after graduation, and during any approved deferment periods.
• Unsubsidized Loans: These are not need-based and are available to most students regardless of income. Interest begins accruing as soon as the loan is disbursed, including while you’re in school and during the grace period after graduation.

In both cases, repayment typically begins six months after graduation, offering a cushion to find employment and build financial stability.

Private Loans

Banks, credit unions, and online lenders provide options for students. These are based on creditworthiness and may require a cosigner. They often carry higher interest rates, fewer borrower protections, and typically require payments to begin immediately, even while you’re still enrolled in school.

Parent PLUS Loans

Another option is a Parent PLUS Loan, for parents who want to help finance their child’s education. These are available through the federal government and are issued in the parent’s name, not the student’s. They require a credit check and generally have higher interest rates than standard student loans, and repayment begins immediately after disbursement, although deferment options are available while the student is in school.

Repayment Options for Federal Loans

Once repayment begins, borrowers can choose from several plans. The Standard Repayment Plan features fixed payments over 10 years and typically results in the lowest overall interest cost. For those needing flexibility, Income-Driven Repayment (IDR) plans adjust monthly payments based on income and family size and may include forgiveness after 20 or 25 years.

Other options include Graduated Repayment, which starts with lower payments that increase over time, and Extended Repayment, which stretches payments over up to 25 years.

Build Your Payoff Strategy Now

Luke 14:28 counsels, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”

This is sound advice whether you’re building a tower or planning for college. Before you begin, you’ll want to think about how you’ll pay for your education long-term.

One step is to borrow less. Instead of asking what’s easy to borrow, start by asking what do you need? It’s easy to underestimate the long-term effects of borrowing without evaluating cost. Start with federal loans, limit private loan usage, and borrow only what’s essential. This will help cut interest rate costs and make repayment more affordable.

You’ll also want to plan for repayment right away. Enroll in an IDR plan if appropriate, and consider making small extra principal payments. You can start on this even before you graduate. You may also qualify for certain loan forgiveness plans based on your chosen career path. Investigating these while you’re in school can help set you up for success later.

Wise Stewardship Means Being Prudent About Debt

Enrolling in college and navigating financial aid can be a thrilling, confusing, and stressful time. Making decisions that align with both your values and your long-term goals can help you find your path. Debt isn’t a sin, and it’s not a reason to avoid pursuing your career goals and dreams. But it is a serious obligation, and something to approach with care and thought.