Grants, scholarships, and federal student loans aren’t always enough to pay for college, but private student loans can help cover the funding gap.

Taking out this kind of loan is a big decision—there are lenders to choose from, interest rates to consider, and repayment plans to select. Here six students share what they wish they would have known before selecting their private student loans.

1. Borrow Only What You Need

“I wish I would have been more mindful of the amount I was eligible for from my private loans versus how much of that amount I actually needed for school [and living] expenses. It can be really easy to succumb to the idea of having more. I think that as a student, it’s easy to forget that a loan is only borrowed, especially when it’s stretched out over a four-year period. It’s important to remember that while you might have more now, that’s also more that you’ll have to pay back later.”

— Adeline Ania Hocine, Columbia College Chicago

Think about how much money you actually need to borrow. If that number feels overwhelming, the following options could make you less reliant on student loans:

  • Grants and scholarships: These provide free money that doesn’t have to be repaid.
  • Work-study: This federal program allows you to earn money to put toward academic expenses.
  • Community college: Starting your education at a community college can help you save money before transferring to a four-year university.

2. Ask About Rewards

“I didn’t know that the private sectors [offered] any kind of rewards or bonuses for good grades.”

— Nate Jensen, Purdue University

Before choosing a private student loan, see if you’re eligible for any special rewards. For example, you might be able to snag a cash back reward upon graduation . Your academic performance can also work to your advantage. Just be sure to read the terms and conditions so that you don’t miss out on any rewards.

3. Understand Interest Rates

“I wish I had done more research on how interest rates are calculated and how greatly they affect how much you will end up having to pay back when the time comes to start making student loan payments.”

— Abbie Long, University of Kentucky

Interest rates on private student loans can vary widely, but your creditworthiness is an important factor. The most competitive rates tend to go to borrowers who have strong credit. A good credit score suggests that you’re a trustworthy borrower who will repay their loan as promised. The same goes for cosigners.

The type of interest rate you choose is also important. With a fixed rate loan, your interest rate will always stay the same. Variable rate loans fluctuate with current market conditions. That means your monthly payment could go up and down over time.

4. Know Your Options

“I wish I would’ve understood interest rates and repayment plans a lot better. The whole process of selecting how you wanted to structure the loans and repayment [seemed] kind of like, ‘Take it or leave [it],’ when in reality, there were [multiple] options.”

— Nate Jensen, Purdue University

A loan’s interest rate is what you’re being charged to borrow the money—and rates can vary from one private student loan lender to the next. Your repayment term is equally important. The standard repayment plan for a federal student loan is 10 years, but it can be longer or shorter with private student loans. Here’s some important information to keep in mind:

  • A shorter repayment term will result in larger monthly payments, but you’ll pay less interest over the life of the loan.
  • A longer repayment term stretches out the loaninto smaller monthly payments, but you’ll pay more in interest over the life of the loan.

5. Know When Your Payments Will Begin

“Find out how long your grace period is for each of your loans. It may not be the same for each loan. I was unclear about my first payment date for one of my loans, so I accidentally missed my first payment by a couple of months.”

— Alexandra Dombroski, Hofstra University

If your lender offers a grace period, your first student loan payment will likely be due six months after graduation . That cushion gives you time to find a job and get your finances in order. It’s still wise to contact your loan providers to clarify:

  • When your first loan payment is due
  • How much the minimum payment will be
  • How to enroll in autopay, which could reduce your interest rate

Be sure to factor your new loan payment into your monthly budget. That can help prevent a missed payment and protect your credit score.

6. Make Payments Early

“Throughout my education, I focused on making payments toward my federal loans. I wish I would have done the same for my private loans, not realizing at the time how much that could have helped me postgrad. By paying back small amounts throughout college, you can set yourself up for a manageable future.”

— Adeline Ania Hocine, Columbia College Chicago

When it comes to paying back private student loans, you don’t have to wait until you graduate to get started. Making payments while you’re still in school can help you avoid capitalized interest, which will reduce your total loan costs. That’s because student loans start accruing interest as soon as they’re disbursed. Once the grace period ends, that unpaid interest is added to the original amount borrowed. Interest is then calculated based on this new, higher amount. In other words, you’ll be charged interest on interest. Paying just $25 a month while you’re still in school could save you hundreds of dollars.

When done responsibly, taking out private student loans can help you pay for college. Just know that it’s a major financial decision, so you’ll want to make sure it aligns with your long-term goals and expected postgrad earnings.

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