7 Student Loan Mistakes and How to Reduce Debt

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How to Reduce Student Loan Debt

College is expensive, and it doesn’t get any easier when you have to pay off your student debt after graduation.

According to Student Loan Hero, the average graduate leaves school with over $29,000 in student loan debt, which can feel like an insurmountable amount! 69% of college seniors who graduated from public and private nonprofit colleges had student loans in 2019.

It goes without saying that you don’t want to be stuck with large student loan debts after graduation if at all possible. There are some common mistakes students make when it comes to student loans that can leave them in a difficult situation later on if they aren’t careful. So, let’s take a look at these mistakes and how you can best the ROI when attending college!

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Student Debt Mistakes

Borrowing Too Much Money

Borrowing too much money for college is one of the biggest mistakes that students make. It can lead to a lifetime of debt that it’s impossible to escape from. A student should borrow what they need, not what they want or believe is necessary.

It can be enticing to borrow the maximum amount that your school offers, especially if the cost of living is high and you don’t want to worry about having enough money. However, this can leave you with a lot more debt than necessary and it could be difficult for you to pay off once your loans come due after graduation.

Not Finding the Best Interest Rate

If you’re a student looking for loans to pay for school, you might be tempted to take the first offer that comes your way. But if you want to keep your debt to a minimum, it pays in the long run to find the best interest rate available.

The key is getting pre-qualified before shopping around so that lenders can tell you what they would offer based on factors like the amount of money needed and how much time there is between now and when repayment will start.

Here are some tips:

1) Get pre-approved from more than one lender so that at least two offers are in hand when applying for a loan

2) Apply only after comparing all terms and rates among several different lenders

3) Shop around with multiple lenders

4) Don’t make a decision until you have all offers in hand.

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Using Student Loans for Living Expenses

It can be tempting to use student loans for living expenses, but this is a mistake.

Student loans are meant as a supplement and ideally are not the sole means of financing your life while you’re in school. You should try to use student loans only for tuition, and room & board if possible.

While it might be difficult, holding down a job (even part-time) to cover living expenses is your smartest option.

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Avoid Private Loans

While it may make sense to turn towards a private loan if you have exhausted all other student loans and still do not have enough money to cover your expenses, this can often lead to more trouble down the road.

Private lenders typically offer fewer repayment options than federal ones and they will likely charge higher interest rates as well.

They may even require a cosigner, which could harm your own credit if the student is unable to make payments.

In addition to this, private lenders typically have stricter qualification requirements and may not be willing to extend additional funds when you need them most.

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Opting for Longer Repayment Terms

The quickest way to get rid of student debt is by paying off the loan as quickly as possible. The sooner you repay your loan, the less interest will accumulate and the less money you’ll end up paying in total.

So if you have a choice between two repayment plans with different monthly payments, don’t always jump at the lowest monthly payment because it might be more expensive in the long term.

However, there are also some tradeoffs that may make this option unrealistic for many students. Many people find that their income increases significantly after they graduate from college and start working full-time; so even though it might be a better short-term option to make larger monthly payments, it could be a problem for those whose earnings don’t allow it at the current time.

In this case, opting for longer repayment options might be a good idea to keep your monthly payment manageable. If this is the case, then consider refinancing as soon as your income situation improves.

Refinancing to Lower Monthly Payments

Refinancing your student loans might seem like it will save you money in the long run, but that may not always be true.

The cost of refinancing depends on many different factors – the size of your loan, what interest rate you get, and how much time has elapsed since taking out the loan. It’s worth considering whether or not it would be better to invest in something else instead.

You should also be aware that refinancing your loans may mean you lose some of the benefits associated with student loans, such as income-based repayment options or loan forgiveness programs.

Not Making Payments On Time

If you are not paying your student loans on time, then the consequences can be catastrophic.

By missing payments, you’re putting yourself at risk of defaulting and having your wages garnished. You’re also jeopardizing any future borrowing since lenders will see that you have a history of missed or unpaid payments. That means difficulty getting home loans, and other credit you may need in the future.

For this reason, it’s important to make sure that when making student loan repayments, you always keep up with them by sending in monthly payments which will help ensure that your credit is maintained and that there won’t be any penalties assessed against it.

How to Reduce Student Debt

Consider an Alternative to College

Before starting your college journey think about some of the alternatives that might help you reduce the need for student loans. Community college, trade schools, technology bootcamps, and online certificates and degrees are all alternatives to a 4-year college.

Not only do these schools typically cost less to attend, but they also offer a more focused education. They are better suited for students who either want to enter the workforce right away, are looking to change careers, or have specific career goals in mind.

Live at Home

Living at home is a great way for students to save on tuition costs as well as living expenses such as food and transportation fees.

Living with your parents is not only advantageous for saving on costs but also during study time. Having a quiet place to study and focus with no distractions is a huge help when studying for final exams.

A lot of students find it difficult to juggle friends, social events, and their school work which leads to poor grades or even dropping out before getting their degree.

Parents may not always understand what college life is like but they are usually more than happy to help their children in any way possible. Even if it’s only providing a quiet place for them to study, parents are always willing to give students the support they need.

If you end up saving money and avoiding student loans as well, then it’s a win-win.

Work and go to School Part-Time

By working while you attend school part-time, you are able to cut down on the student loans you need in order to pay for your education. Working part-time can be a great thing, but make sure that it does not interfere with your schoolwork or studies. 

If the job starts to take up too much time, you might want to rethink your decision. It can be hard work juggling both a part-time job and classes at once, but it is possible if you know how to manage yourself effectively.

Go to an In-State College

Going to a college in your state rather than an out-of-state one can save you a lot of money.

Research from The College Board showed that the average tuition and fees at public four-year universities in 2016 were $10,486 for in-state students and $15,873 for out-of-state students. This is just an average, so there are many cases when that delta is far greater.

If you are lucky enough to be able to attend school close to home, then you should seriously consider it. You can save thousands of dollars in student loans, and you’ll likely have similar job prospects regardless of what school you attend.

Find Scholarships and Grants

If you’re one of those people who are interested in paying back your student loans as quickly as possible, there are some things you should be thinking about how scholarships and grants can save you money.

Scholarships will often cover all or part of your tuition costs; grants might be able to help with living expenses such as food and rent; both types will lower your total borrowing costs. Their main benefit is that they don’t have to be repaid. That’s right, somebody else foots the bill for your education and in most cases, you owe nothing when you’re done with school.

Scholarships and grants might take a little more time to find, but it’s more than worth the effort.


If you’re thinking about taking out student loans to pay for school, think again. There are many alternatives that can reduce the need for student loans and help students avoid debt altogether. Whether it’s living at home or looking into scholarships and grants, there are plenty of ways to get around borrowing money from a bank in order to fund your education.

And if all else fails, remember what we said earlier, you can always work while going to school. Not only will this help you afford your ideal school, but you may also have some extra cash left over after graduation.

Regardless of how you decide to proceed, never let yourself get suckered into taking out more money than you need. Student loans serve a great purpose when used correctly. Take out the bare minimum, and make sure the job opportunities with your degree offer salaries worthy of repaying your loans.

If you keep these things in mind, you can avoid some of the pains students before you have suffered.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines, or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.


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