Student loans can feel like a necessary evil. You need them to get through school, but if you’re not careful, they can cost you way more than they should. And let’s be honest—who wants to throw away thousands of dollars on avoidable mistakes? The good news is that with a little know-how, you can sidestep the biggest financial pitfalls and keep your hard-earned money where it belongs: in your pocket.
So, let’s break down the ten most common mistakes people make with student loans—and how to avoid them.
1. Borrowing More Than You Actually Need
It’s tempting to accept every dollar that’s offered to you. After all, free money, right? Not quite. Every dollar you borrow now is a dollar (plus interest) you’ll have to pay back later. If you take out more than you actually need for tuition and basic living expenses, you might end up drowning in unnecessary debt.
Instead, take a hard look at your budget. How much do you truly need for school-related costs? Cutting back on excessive borrowing now can save you from major financial stress later.
2. Treating Your Loan Like Free Money
We get it—when that lump sum hits your account, it’s easy to see it as a windfall. Suddenly, that new laptop, spring break trip, or daily coffee habit doesn’t seem like a big deal. But fast forward a few years, and those little splurges will have ballooned into a mountain of debt.
A better approach? Treat your student loan like an investment in your future—because that’s exactly what it is. Use it wisely, and avoid spending on things that won’t actually help you succeed in school.
3. Ignoring Interest While You’re in School
If you have student loans that accrue interest while you’re still in school, that balance can grow faster than you expect. Many borrowers don’t realize this and are shocked when their loan balance is much higher than they expected upon graduation.
Want to minimize this? If possible, make small interest payments while you’re still in school. Even paying just a little each month can prevent that interest from capitalizing and turning into a much larger debt load later.
4. Not Exploring All Loan Options
Different types of loans come with different benefits. Some offer fixed interest rates and government protections, while others provide flexibility in repayment. It’s important to research all available loan options to determine what works best for your financial situation.
Before making a decision, compare interest rates, repayment terms, and available borrower benefits to ensure you’re making the best choice for your future.
5. Ignoring Income-Driven Repayment Plans
Struggling to make payments? You don’t have to suffer in silence. Some student loans offer income-driven repayment (IDR) plans that adjust your monthly payment based on how much you earn. For many borrowers, these plans can make student loan payments much more manageable.
If you’re facing financial hardship, look into these plans before defaulting or falling behind on payments. It’s a far better option than wrecking your credit score or accumulating late fees.
6. Not Considering Refinancing When It Makes Sense
Are you paying a ridiculously high interest rate? Many borrowers stick with their original loan terms, never considering how much they could save with a better rate. Understanding how to refinance student loans can be a great way to lower your monthly payments and save thousands over time.
Of course, refinancing isn’t for everyone. If you have federal loans, refinancing with a private lender means giving up benefits like loan forgiveness and income-driven repayment options. But if you have solid credit and stable income, refinancing could be a smart move to cut costs. Before making any decisions, weigh the pros and cons carefully and shop around for the best rates.
7. Paying Late or Missing Payments Altogether
Life gets busy, and student loan payments can easily slip through the cracks. But missing payments—even just one—can lead to late fees, increased interest, and a hit to your credit score.
An easy fix? Set up automatic payments. Many lenders even offer a small interest rate reduction if you enroll in autopay. If you’re struggling financially, don’t ignore the problem—reach out to your loan servicer and explore repayment options.
8. Not Communicating With Your Loan Servicer
Speaking of loan servicers, avoiding them when things get tough is a huge mistake. If you’re struggling to make payments, the worst thing you can do is stay silent. Many borrowers don’t realize that there are options like deferment, forbearance, or adjusted repayment plans that could help.
Loan servicers are there to help you (even if it doesn’t always feel like it). So, if you ever feel overwhelmed, pick up the phone and ask about your options before missing payments.
9. Overlooking Employer Loan Repayment Benefits
Did you know some employers help pay off student loans as part of their benefits package? If you’re job hunting, this is something worth looking into. Even if your current employer doesn’t advertise a student loan repayment program, it doesn’t hurt to ask.
If you’re lucky enough to have this benefit, take full advantage of it. Every extra dollar paid toward your student loans is one step closer to financial freedom.
10. Failing to Keep Track of Your Loans
Ever lost track of a bill and had to deal with the consequences? Now imagine that happening with your student loans. With multiple loans, servicers, and changing terms, it’s easy to lose track of what you owe and when payments are due.
To stay on top of things, create a simple system to track your loans. Use a spreadsheet, a budgeting app, or even set calendar reminders to keep everything organized. Knowing where you stand financially will make it easier to manage your loans and avoid costly mistakes.
Final Thoughts
Student loans don’t have to be a financial nightmare. By avoiding these common mistakes, you can save yourself thousands of dollars and a ton of stress. The key is to be proactive, stay informed, and make smart decisions about borrowing and repayment.
Got student loans? Take control of them before they control you. A little effort now can make a huge difference in your financial future.
