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12 Strategies for Smart Student Loan Borrowing

Private student loans offer current rates as low as 5.09% to 14.50%. Click here to find a preferred lender.

Student loan debt is largely unavoidable. Nearly 90 percent of students that apply for financial aid graduate with student loan debt. Fortunately, there are many ways you can save money on your student loans.

Here are twelve smart strategies for borrowing to pay for college.

1. Budget before you borrow.

Don’t borrow more than you can afford to repay. Aim to borrow less for your entire education than the expected starting salary for your field of study.

2. Focus on free money first, such as grants, scholarships, and other types of financial aid that don’t need to be earned or repaid.

Apply for financial aid by filing the FAFSA every year. Search for scholarships with a free scholarship matching service like and earn points to enter scholarship drawings at

3. Borrow federal first.

Federal student loans are cheaper, more available, and have better repayment terms than private student loans. For example, federal student loans offer income-based repayment and public service loan forgiveness, while private student loans do not.

4. Consider private student loans only after you have exhausted other sources of financial aid.

Grants and scholarships, which don't have to be repaid, are the best sources of money to pay for college. Loans should be a secondary resource, if possible.

paying for college with private student loans

5. Minimize debt.

Borrow what you need, not what you can.  Don’t treat loan limits as targets. You can choose to borrow less. Every dollar you borrow will cost about two dollars by the time you repay the debt.

6. Live like a student while you are in school, so you don’t have to live like a student after you graduate.

Cut college costs by enrolling at a lower-cost college, such as an in-state college or a college that replaces loans with grants or scholarships in the financial aid package. You can also save by living at home and by buying used textbooks.

7. Ask the college if it offers a tuition payment plan.

For a small fee, many colleges spread the bill into monthly installments over the academic term or academic year. A tuition installment plan can help you avoid the need to borrow long-term student loan debt.

8. Be sure to claim the student loan interest deduction on your federal income tax return.

You can reduce your taxable income by up to $2,500 in interest paid on federal and private student loans each year.

Paying for college private student loans can help

9. When you graduate, choose the shortest repayment term that you can afford.

The higher monthly payments will save you money on interest and pay off the debt quicker.

10. If you can, make larger or extra payments on the loan with the highest interest rate.

There are no prepayment penalties on federal and private student loans. Prepaying high-interest debt will save you the most money.

11. Sign up to have your monthly student loan payments automatically deducted directly from your bank account.

Not only will you save on postage, but many lenders offer interest rate discounts for borrowers who repay their loans through auto-debit. You will also be much less likely to be late with a payment.

12. If you manage your credit responsibly by making every payment on time, your credit scores should improve within a few years after graduation.

Then, consider refinancing your private student loans with a private consolidation loan. You may be able to qualify for a lower interest rate.

What to do next?

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What are my private student loan options?