Though I recommend trying to get as much funding through grants and scholarships first, student loans can still be a great option. This is especially true if the loans are offered by the government (referred to as federal student loans), which often have much friendlier loan terms and lower interest rates. But even private loans can be a good option, as long as you’re careful and aware of what you’re getting yourself into. Unlike grants and scholarships, loans are borrowed money, meaning whatever you take out you’ll eventually need to pay back. You’ll actually have to pay back even more than what you borrow, since student loans accrue interest. Let’s say, for example, that you take out $10,000 in student loans. You’ll be expected to pay back that $10,000, plus somewhere maybe between 3-10% in interest, so the total cost of that loan is actually more than $10,000 (the total amount will also depend on how quickly you pay it back). However, don’t get too scared by that big number. First of all, you won’t be expected to pay it all back at once - it’ll be in monthly payments, usually consisting of just a small percent of the total amount owed (you can calculate how much with this tool). Many loans also offer income-based repayment plans, so you’ll never be required to make a monthly payment of more than a certain percent of your monthly income, usually around 10% (note this is not an option for ALL loans - check the terms and contract!). The amount to repay can even be zero in certain situations.

Since federal student loans are the most common and offered through FAFSA, we’ll cover them in more detail. Here’s a breakdown of the types:

Direct Subsidized Loans: The most attractive option - the lowest interest rates, and the “subsidized” part means that no interest will accrue while you’re in school or for 6 months after graduating. So while you’re a student, the loan balance will remain fixed and you won’t be expected to make any payments (though you can if you want).

Direct Unsubsidized Loans: Generally similar to the above loans but unsubsidized, so interest does accrue on the loan balance while you’re in school.
Direct PLUS Loans: Federal student loans that are available to the parents of students, with similar terms to the direct unsubsidized loans.

While the first option is the best, the amount you can take out for any of these loans per year is capped - depending on your financial situation and tuition costs. Also note that the interest rates on these loans are fixed, meaning the interest rate of the loan when you take it out will stay exactly the same until you pay it off (or consolidate). Federal student loans also come with some other perks, which you can find listed here. After graduating, you’ll be assigned to a federal loan servicer to help you manage and pay off any student loan debt. NEVER pay for federal loan consolidation, plan switching, servicing, etc. - these options are provided for free by the federal servicer!

The other main source of student loans is private loans. Since these can be offered by any bank or financial institution, it’s hard to cover all the cases. But just know that these are the loans you should be most cautious in taking out. Their interest rates are generally much higher than those offered by federal student loans, and the conditions for repayment may be much stricter. This isn’t to say all private loans are bad, but just to make sure you read the contract and understand the terms you’re agreeing to. Always make sure to check what the interest rate is, whether it’s fixed or variable, what the conditions are for repayment of the loan (is there a certain time you need to pay it back, is there a minimum you need to pay each month, etc.), and whether there are friendly repayment plans available. Some banks, especially local community banks, can offer great deals for students. And if the money is needed in order to get your degree, then it may be the right decision in the long-term. If you’re unsure of what to do, talk to your school’s financial aid department!

One last note - I am not a financial advisor, just someone who went through this whole process themselves and did a lot of Internet research for the information written above. While the information is accurate and sourced, it is not financial advice - so make sure to talk to a professional if you have serious concerns or questions.

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There are other sources of financial aid, though much less common, also available - so don’t consider the options listed in this map to be the end-all-be-all. But for the average student, most of your college expenses will come through some mix of grants, scholarships, and student loans, with much or all of that funding relying on FAFSA completion. The other side of the “paying for college” equation is choosing a school you can afford. Public universities typically have lower tuition than private universities, and community colleges even lower than both of those. Most students only consider prestige or location when choosing their school, but the cost of attendance (which is the tuition cost minus financial aid offered) should be a key consideration as well. Graduating with as little student loan debt as possible will make your post-college life (as far away as that may currently seem) much easier, as will choosing the friendliest providers of student loans you do need to take. So do not make the mistake of skipping out on the FAFSA, or applying to relevant scholarships! Your future self will be thanking you for the effort you put in today. And if you’re already in college and struggling with how to pay, never hesitate to go to your school’s financial aid office and ask for help.

Which map will you explore next?

Map to Credit Cards

Intro to Credit Cards

Credit cards can be dangerous ways to get stuck in debt. But if used knowledgeably, they can also be powerful tools for making future purchases easier and actually making some money back in the long run.