5 Student Loan Mistakes You Should Avoid

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1. Choosing The Wrong Type Of Loan

Not all student loans are created equal. And picking the wrong one can haunt you for years.

You need to understand what you’re signing up for before you click “accept.”

Here’s what to keep in mind:

• Federal loans > private loans. They usually come with lower interest and flexible repayment options.
  
• Subsidized loans don’t charge interest while you’re in school. huge advantage.
  
• Private loans might look tempting, but often have variable rates that can skyrocket later.
  

👉 Here's How You'll Do It: Compare your loan options on the Federal Student Aid website before borrowing a single dollar.

Make It Easy: Consider a student loan planner notebook to jot down loan types, due dates, and interest details.

2. Taking Out Too Much Money

It’s easy to borrow more than you need. especially when the lender offers it like free candy.

But every dollar you borrow today becomes two or three tomorrow once interest hits.

Try this simple check before accepting the loan amount:

• Borrow only for essentials. Tuition, books, transportation. nothing more.
  
• Estimate your costs. Create a quick budget for living expenses each semester.
  
• Send back the extra. You can always return unused loan funds to reduce your debt.
  

👉 Here's How You'll Do It: Borrow only what you absolutely need for school costs and return any leftover loan money immediately.

Make It Easy: Consider a college budgeting workbook to help map out your semester costs before borrowing.

3. Using Loan Money For Non-Essentials

That refund check might look like a gift. But it’s really just debt in disguise.

Spending loan money on things like pizza, vacations, or new gadgets can cost you double later.

Here’s how to stay smart with it:

• Keep loans for school stuff only. Tuition, supplies, housing. nothing beyond that.
  
• Avoid lifestyle inflation. You don’t need a new laptop every semester.
  
• Remind yourself it’s borrowed money. Future-you has to pay it back. with interest.
  

👉 Here's How You'll Do It: Deposit refund checks into a separate account and use them only for school-related costs.

Make It Easy: Use a Betterment Cash Reserve Account to safely hold student funds and separate them from daily spending.

4. Not Knowing Your Interest Rate

Your interest rate isn’t just a boring number. It’s what determines how much your debt grows while you sleep.

Many borrowers don’t even know what their rates are, which is like driving blindfolded financially.

You should always:

• Write down every rate. Each loan may have a different one.
  
• Know the difference. Fixed rates stay the same; variable rates move up or down.
  
• Refinance when it makes sense. Lower rates can save thousands over time.
  

👉 Here's How You'll Do It: Log in to your loan portal, list your current rates, and look into refinancing options if they’re high.

5. Not Planning How To Pay It Back

Graduation day hits fast, and suddenly the loan bills start rolling in.

Without a clear repayment plan, it’s easy to panic or fall behind.

You can make it painless by doing this:

• Start planning before graduation. Know your repayment start date.
  
• Pick a strategy. Use the debt snowball or debt avalanche. Just pick one and commit.
  
• Set up autopay. Never miss a payment or risk hurting your credit.
  

👉 Here's How You'll Do It: Create a simple payoff plan six months before graduation and set reminders for your first due date.

Make It Easy: Use Undebt.it to build your custom repayment plan and stay organized automatically.

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