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After exploring all your grant aid and scholarship options (aid you don’t have to pay back) and factoring in college savings, there’s a good chance you’ll still need more money to meet your college expenses. That might mean applying for a student loan. Loans must be repaid, so be smart about how much you borrow and have a plan to pay it back.

Know how much you need

Before enrolling in school and accruing debt, check out your estimated net price after financial aid at any of Indiana’s colleges with the Indiana College Costs Estimator. You can decrease your college debt by borrowing only what you need. Use a student budget calculator to determine how much additional money you will need. If you’re already enrolled, you can see which courses transfer among all Indiana colleges at TransferIN.net.

Know the return on investment

You can decrease your college debt by matching the cost of your college degree with your expected salary. Explore careers to see what your expected salary will be. Remember that starting salaries are much lower than average salaries in any field.

Know the types of loans

Loans are either federal or private. You can decrease your college debt by choosing federal loans first. You must file your FAFSA by March 10 (or your college’s deadline) each year, or you could lose your federal loan eligibility.

  • Federal loans are from the federal government and include the Perkins and Stafford Loans for students and the Parent PLUS loans for parents. Federal loans almost always have lower, fixed interest rates. (When you pay back your loan, you will pay both principal—the original amount you received as a loan—and interest—a percentage of the principal. The faster you pay off the principal, the less interest you will have to pay.)
  • Private loans are from private companies. They usually have higher interest rates that may not be fixed, so you may wind up paying more interest than you thought.

Credit cards are a type of loan—but watch out! You should never put tuition on your credit card unless you know you can pay it off when the bill comes. Credit cards often have very high interest rates for the amount you aren’t able to pay, and the bills will be due every month—much sooner than you’ll have to pay off a federal student loan.

Know how to spot a scam

Financial aid scams are real, and you need to be aware of the tactics some companies can use to convince you to buy their services. Knowing the warning signs to look for can save you a lot of time, money and headaches.

Claims to question:

  • “You’re guaranteed at least $3,000 in college aid or your money back.” This claim doesn’t mean anything. Most students are eligible for at least $3,000 in federal loans anyway. A loan is considered student aid, so you can’t ask for a refund if that’s all you’re offered. And remember: Refund guarantees often have conditions or strings attached, so always get refund policies in writing.
  • “We’re the only ones who can help you through the process and find all the aid you're eligible to receive.” Unlikely. Plenty of free help is available at CashForCollegeIndiana.org.
  • “Give us your bank account information, so we can deposit your scholarship with our standard processing fee.” Watch out! Legitimate organizations don’t charge scholarship processing fees. Don’t give anyone your bank account information, credit card number or Social Security Number unless you initiated the contact and trust the company. Be careful: This information can be used for identity theft.

Know you need to complete college

You can decrease your college debt by maintaining full-time student status until you graduate and by finishing your degree as quickly as possible. The less time you spend in school, the less money you’ll have to borrow. Read about finishing faster to make the most of your time in college.

For federal loans, you will have to start paying back loans if you are no longer a full-time student. Usually, 12 credit hours or more during spring and fall semesters are required to maintain full-time status. Check with your financial aid office to see exactly when you will need to start making repayments. If you have taken out private loans, repayment may start at any time. Save all paperwork on the loans and contact the lending agent if you have questions.

Know how much you’ll repay

Remember, your loan repayments will be part principal (the original amount you received from the lender) and part interest. You can use a loan calculator to estimate your monthly repayment.

As a general rule of thumb, the total amount you borrow should never be more than what you expect to earn in one year after graduation. Explore careers to see expected salaries, but remember that starting salaries are much lower than average salaries.

Know how to borrow wisely and repay responsibly

Remember that you’ll have to pay back more than you received, so don’t use loans to pay off other bills or for unnecessary expenses. Student loans should only be used for expenses related to getting your education, not for shopping sprees or car payments. Those things can wait until you have a valuable degree! Decrease your college debt by following Learn More Indiana’s checklist for borrowing and repaying loans.

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