6 Major Student Loan Mistakes You Need to Avoid

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Do you wish you had a time machine so you could go back and make different decisions about your student loans?

If so, you’re definitely not alone. The fact is, student loan regrets are very common. Mostly because borrowers often don’t understand the long-term consequences of their student loan choices.

Seven borrowers recently shared their student loan regrets with us, and what they wish they’d done differently if they could turn the clock back. Here’s how these borrowers are managing student loans today and what you can do to avoid their student loan mistakes.

6 borrowers share their biggest student loan regrets

1. I deferred payments for years

Tasha Mayberry-Mullyakaev, the founder of web design, PR, and marketing company Social Media 22, couldn’t afford to pay her student loans after graduating. She thought that deferring would save her credit score, but really it caused her $40,000 student loan debt to balloon to over $70,000.

Mayberry-Mullyakaev learned the hard way that ignoring student loan payments meant her debt would just keep increasing. Due to compound interest, unpaid student loan debt will only continue to grow.

Therefore, if you can’t afford your federal student loan monthly payments, consider an income-based repayment plan. You can also punch in your loan info into our Student Loan Income-Based Repayment (IBR) Calculator to see if this is a viable option for you.

As Mayberry-Mullyakaev says, “Know how much you are borrowing and what payments will be.” Essentially, you’re better off doing the math sooner rather than later so you have a manageable plan for paying student loans.

2. I didn’t refinance my loans when I could

“My biggest regret is not refinancing my student loans,” says Zina Kumok, a freelance writer who specializes in personal finance. If she had refinanced, Kumok says, she could have saved hundreds.

Her advice? “I tell everyone who’s paying high-interest rates to consider refinancing, unless they’re trying to have their loans forgiven,” Kumok explains.

Refinancing your student loans can lower your interest rates and reduce your monthly payments. And private lenders allow you to refinance both federal and private loans.

What’s more, refinancing can often save you thousands of dollars over the life of your loans.

Despite her student loan mistakes, Kumok was able to bounce back. She managed to pay off $28,000 in student loans in just three years.

3. I spent my loan money on shopping sprees

Student loans are not free money, a fact that some students learn the hard way.

For instance, Stephanie Caudle ended up spending her loan money on shopping sprees. Says Caudle, “I had no idea that the same check I anticipated would be a check I would someday have to pay back.”

If she could do it differently, she would have “started saving money to pay back my student loan debt before I even graduated from college.” Today, Caudle is a freelance writer and founder of Black Girl Group, a micro-job platform that connects African American women with freelance opportunities.

Chantel Blake also regrets spending her loan money on frivolous expenses. She took out the maximum amount available and spent the remainder on a trip to Europe. Now, Blake runs Breaking Up With Debt, where she works as a personal finance coach helping others avoid her same student loan mistakes.

Caudle and Blake are not alone in spending student loan money on personal activities. A recent Student Loan Hero survey showed that the class of 2017 was twice as likely as the class of 2016 to spend loan money on non-educational expenses. In the end, all that pizza and beer had a much higher price tag than students realized.

4. I had no idea how much I was taking out

Like many students, Phil Risher, founder of the Young Adult Survival Guide, took out student loans without a second thought.

“My biggest student loan regret is not knowing the amount of loans I was taking out each semester,” Risher says. When he was faced with paying them back, he got a big wake up call.

Risher wishes he’d reached out to his college financial aid office sooner to discuss repayment plans. He advises anyone taking out loans to come up with “a proactive approach to taking on debt.” Wherever you are in life, it’s not too late to track your debt and come up with a plan to conquer it.

5. I paid for a degree I don’t use

Blake is also a student loan borrower who wishes she’d done a cost-benefit analysis before getting her Master’s degrees, especially because she ended up with over $75,000 in student loans. Yet, three years later, she’s still not working in the industry in which she got her graduate degree.

Before taking on student loans to finance an expensive degree, consider the return on investment. A graduate degree should advance your career and lead to a higher salary. Therefore, consider whether the benefits of a degree will outweigh its costs.

6. I used my loans to go to an expensive college

Nikki Koontz didn’t hesitate to take out loans for her four-year college and a year-long study abroad experience in London.

However, Koontz says she “had no idea how much anything cost or any concept of compounding interest.” The result, unfortunately, was “off-the-charts ridiculous” student loan debt.

“I will be paying off my loans with a very high monthly payment for the rest of my life,” says Koontz. “It’s a huge burden that I wouldn’t wish on anyone.”

As the Assistant Director of Marketing at Southern Utah University, Koontz now helps students avoid her student loan mistakes. While she’s a strong proponent of higher education, she encourages students to speak with financial aid advisors before taking out loans.

“Get all the facts up front,” says Koontz. “Try to find scholarships or work study opportunities. There is a lot of unclaimed money, but you have to be willing to work for it.”

Recovering from student loan mistakes

Most borrowers make mistakes with their student loans out of a lack of financial literacy. They often take out loans without understanding the long-term consequences of student loan debt.

Therefore, if you’re considering taking out student loans, first educate yourself on how they work. Learn about compound interest, grace periods, and repayment plans.

Just as importantly, consider the return on investment of your degree. Remember, you won’t be able to pay back student loans without an income.

And if you’re dealing with the fallout of student loan mistakes, you definitely have options for managing student loans and getting your finances back on track.

Refinancing can save you thousands of dollars in interest. Additionally, income-based repayment plans and loan forgiveness programs are also promising avenues for debt repayment.

Student loans are a huge burden. But by sharing both our mistakes and successes, we can work together to resolve the current student loan debt crisis in America.

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* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.

1 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

2 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

2This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 5/18/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.


3 Important Disclosures for Ascent.

Ascent Disclosures

Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.

  1. Variable rate loans are based on a margin between 2.90% and 16.50% plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 0.667%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an Annual Percentage (APR) range between 3.18% and 13.92%. Fixed rate loans have an APR range between 4.00% and 14.92% based on your credit worthiness and your selected program. Competitive variable rates calculated monthly at the time of loan approval. Rates are effective as of 05/01/2020 and reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. (See Automatic Payment Discount Terms & Conditions.)
  2. Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress.
  3. Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment.
  4. Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000.
  5. Interest rate reduction of 0.25% for enrollment in automatic debit applies only when the borrower and/or cosigner signs up for automatic payments and the regularly scheduled, current amount due (including full, flat, or interest only payments, as applicable) is successfully deducted from the designated bank account each month. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of In-School, Deferment, Grace or Forbearance. If you have two (2) returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the 0.25% interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the 0.25% interest rate reduction.
  6. All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding.
  7. Eligibility, loan amount and other loan terms are dependent on several factors, which may include: loan product, other financial aid, creditworthiness, school, program, graduation date, major, cost of attendance and other factors. Aggregate loan limits may apply. The cost of attendance is determined and certified by the educational institution.
  8. The legal age for entering into contracts is eighteen (18) years of age in every state except Alabama where it is nineteen (19) years old, Nebraska where it is nineteen (19) years old (only for wards of the state), and Mississippi and Puerto Rico where it is twenty-one (21) years old.
  9. 1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation:
    • The student borrower has graduated from the degree program that the loan was used to fund.
    • The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate)
    • The graduation date is more than 90 days and less than five (5) years after the date of the loan’s first disbursement.
    • Any loan that the student has borrowed under the Ascent loan is not more than 30-days delinquent or in a default status as of the graduation date and until any Graduation Reward is paid.
  10. Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner.

* Application times vary depending on the applicant’s ability to supply the necessary information for submission.


4 Important Disclosures for Discover.

Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including Undergraduate, Health Professions, Law, MBA, Residency, and Private Consolidation. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 1.00% as of April 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
  5. Get a variable interest rate from 2.99% APR to 6.24% APR (3-Month LIBOR + 1.99% to 3-Month LIBOR + 5.24%) for either a 10-year or 20-year repayment term. Or lock in a fixed interest rate from 3.74% APR to 6.49% APR for a 10-year repayment term or from 3.74% APR to 6.49% APR for a 20-year repayment term. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 1.00% as of April 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both.
Lowest APRs shown are available for the most creditworthy applicants.

5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

  1.  Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

6 Important Disclosures for Citizens.

Citizens Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 3.54%- 6.40% (3.54% – 6.40% APR). Fixed interest rates range from 3.79% – 6.65% (3.79% – 6.65% APR).

Graduate Rate Disclosure: Variable interest rates range from 2.72% – 6.11% (2.72% – 6.11% APR). Fixed interest rates range from 3.49% – 6.36% (3.49%-6.36% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.47% – 8.35% (1.47% – 8.20% APR). Fixed interest rates range from 4.45% – 10.74% (4.45% – 10.59% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.47% – 7.25% (1.47% – 7.10% APR). Fixed interest rates range from 4.40% – 9.64% (4.40% – 9.49% APR).

Parent Loan Rate Disclosure:  Variable interest rates range from 3.09%-6.23% (3.09%-6.23% APR). Fixed interest rates range from 5.48%-8.52% (5.48%-8.52% APR).

Bar Study Rate Disclosure:  Variable interest rates range from 4.79% – 9.93% (4.79% – 9.85% APR). Fixed interest rates range from 7.39% – 12.94% (7.39% – 12.82% APR).

Medical Residency Rate Disclosure:  Variable interest rates range from 3.88% – 7.38% (3.88% – 7.04% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.08% APR).

Variable Rate Disclosure: Variable Rates are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of May 1, 2020, the one-month LIBOR rate is 0.44%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

2.00% – 10.01%*,1Undergraduate and Graduate

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1.49%
11.98%
2
Undergraduate, Graduate, and Parents

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3.18% – 13.92%3Undergraduate and Graduate

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2.09%
11.49%
4
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3.52% – 9.50%5Undergraduate and Graduate

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3.54% – 6.40%6Undergraduate and Graduate

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.