College is no easy feat, especially when students are worried about paying for it. It’s more stressful when one does not know how to navigate through the shark-infested waters of student loans and credit. Unfortunately, there is no road map pointing to the best way to survive the traps of taking out student loans, but there are resources out there to provide help for the average college student. 

According to personal finance writer Abbey Hayes, the five most common mistakes students make when taking out student loans are assuming they need the student loan, not exhausting other options, spending all the money offered, failing to figure out monthly payments and failing to keep track of debt acquired.

There are plenty of ways to avoid taking out a loan, such as choosing a cheaper school, committing to a school offering a scholarship, attending a work-based school for free, working while attending school part-time or putting off college until one has enough money saved up.

One of the most common mistakes is  students tend to spend all the money given to them. They do not realize they have to pay back the loan in the end. Instead, they either use the money given to them to fully pay for schooling, which would be too expensive if the loan was not given, or they use it on non-school related extras just because it was given to them.

In addition to the top five, financial expert Robert Farrington explains in his article “Two Expensive Student Loan Mistakes to Avoid” how college graduates who delay in payments can make student loans even more expensive. 

“You will have to repay your student loans,” wrote Farrington. “There are very few ways to get out of student loan debt without paying them back or getting them forgiven via special student loan forgiveness programs. But waiting on paying back your loans just allows them to grow. If you don’t start making payments on your student loans, interest will accrue and the debt will just grow over time. Even waiting one to two years after graduation could see your student loan balance balloon by 10 percent or more.”

For those interested in student loans, it is important to have a general plan on how it will be repaid so graduates do not fall in the traps Farrington described.

Being aware of what mistakes to avoid when taking out loans is not the only aspect students need to be aware of. There are also different types of loans offered. In order to understand the different types of loans, one must first understand the difference between an unsubsidized loan and subsidized loan, for this can be crucial to students who classify themselves as either undergraduate or graduate among other reasons. According to FAFSA.gov, subsidized loans are “based on financial need and are available only to undergraduate students. The federal government pays the interest on subsidized loans while the borrower is in college and during deferment.” Unsubsidized loans are based on the students education costs and other aid received. The student must pay interest on unsubsidized loans. This would mean subsidized loans would be the most desired.

The website goes to mention the two types of student loans offered for those who need financial aid, including the Federal Perkins Loan Program and William D. Ford Federal Direct Loan Program. 

The Federal Perkins Loan Program is a “campus-based program that provides low-interest loans to undergraduate and graduate students. The amount of the award depends on the student’s financial need, the amount of other aid the student receives and the availability of funds at his/her college.” 

On the other hand, the William D. Ford Federal Direct Loan Program is not campus-based but allows students and parents to “borrow money at a low interest rate directly from the federal government.”

There are different types of loans given under this program: Direct Stafford Loans and Direct PLUS. Direct Stafford Loans are available to both undergraduates and graduates, meaning they can be either subsidized or unsubsidized. Direct PLUS is available to parents of dependent students and to graduate and professional-degree students; it is always unsubsidized.

For more information on student loans visit fafsa.gov, or for a more hands-on approach, make an appointment with the financial aid counselors at Financial Aid on North Campus.