10 Tips for Borrowing Education Loans

Post by Katie Kelsall, financial aid officer at Harvard Extension School

Getting an education is one of the best investments you can make, even if you have to borrow student loans to pay for it. We have all heard horror stories about students graduating with hundreds of thousands of dollars of debt and no way to pay it off, but that isn’t typical. Borrowing education loans isn’t always a bad thing, as long as you do it wisely.

RambergMediaImages via flickr

Here are 10 tips to help you borrow smart.

1. Borrow only what you need.

Technically, you can borrow student loans up to your cost of attendance, which includes not only tuition and fees, but also other expenses, such as housing, food, and transportation. But you are never required to borrow the maximum. If you only need funds for tuition and fees, borrow only that amount. Create your spending plan using a budget calculator.

2. Live like a student.

Many of you may be returning to school after years in the workforce, so it’s important to consider that being a student may require a lifestyle change. Don’t borrow loans to subsidize expensive habits. A latte a day could end up costing thousands of dollars in the end. Estimate your student loan payment using the loan calculator.

3. Choose federal over private education loans.

In general, federal loans are better than private loans because they have fixed interest rates and more repayment options. For more information, see the Harvard Extension page about federal loans. Please note that you must be an admitted degree candidate to qualify for federal loans.

If you must borrow private loans …

4. Do your research.

Be sure to read the terms of the loan carefully before applying. You may find that you can get a lower rate through a different lender, so explore your options. If you are a member of a credit union, see if they offer student loans because they will likely have better terms than other private lenders.

Students not yet in a degree program may qualify for loans through Sallie Mae or Wells Fargo. See our aid resources for nonadmitted students.

5. Use a cosigner.

Even if you can be approved for a private education loan on your own, applying with a cosigner may lower your interest rate and fees.

6. Find alternative resources.

If you’re working, ask your employer if they offer tuition assistance. You should also consider applying for scholarships. You can search for private scholarships online, or contact organizations with which you are affiliated to see if they offer any funding.

Some available scholarship search engines:

7. Take advantage of deals.

Ask for student discounts. Borrow or rent your textbooks from the library or through sites like Chegg instead of buying them. Pack a lunch or eat at the dining hall. If you’re in Boston, explore fun, free things to do in Boston. Keeping costs down will prevent you from borrowing more. It may also allow you to make loan payments while you’re in school so that you can pay off your loans sooner.

8. Make payments while you’re in school.

There is never a penalty for making payments early. At the very least, try to pay the interest while you’re in school. This will prevent capitalization, which increases the principal amount owed.

9. Review repayment options.

Federal student loans have a number of different repayment options including graduated, extended, and income-based payment plans. If you work, or plan to work, in a public-service field, you may also qualify for loan forgiveness. For more information, see Public Service Loan Forgiveness.

10. Ask for help!

If you have questions about loans, or need guidance about how much to borrow, don’t hesitate to contact your financial aid office. If you have already borrowed loans and are having trouble making payments, alert your lender or servicer as soon as possible. You can avoid default as long as you take action. For instance, you may qualify for a forbearance or deferment on your loans.

Financial aid advising is available for students who have been admitted to degree programs. Our staff can answer any questions or concerns you may have about education loans. Contact our advisors today so we can help you get started.