Experts suggest students max out grants and scholarships before turning to loans. But for many families, those options aren’t enough. Data from U.S. News shows that 66% of 2017 graduates took out loans, borrowing nearly $30,000 on average.
With national student loan debt hitting around $1.5 trillion, Marty Somero, financial aid director at the University of Northern Colorado, says students often end up researching loans and repayment plans on their own—sometimes leading to more debt than they realize.
Finding the Best Student Loans
| Lender | Learn More | Fixed APR | Variable APR |
|---|---|---|---|
| Sallie Mae | [View Disclosure] | 3.45% – 15.99% (with autopay) | 4.37% – 14.71% (with autopay) |
| College Ave | [View Disclosure] | 3.24% – 17.99% (with autopay) | 4.24% – 17.99% (with autopay) |
| Ascent Funding | [View Disclosure] | 3.44% – 15.91% (with autopay) | 4.95% – 15.51% (with autopay) |
“Students get overwhelmed by all the choices,” Somero says. Some end up with so many loans they lose track of who they owe and how much. “Figuring out the best repayment plan takes a lot of research and online reading.”
To help, Somero suggests reaching out to a school’s financial aid office for guidance. The U.S. Department of Education’s website also has info on federal aid options.
Financial Aid You Don’t Pay Back
Grants and scholarships—considered “gift aid”—don’t require repayment.
- Grants (like the Pell Grant and FSEOG) are usually need-based and come from the government, states, or colleges. Filing the FAFSA is key to qualifying.
- Scholarships are awarded for merit, athletics, or other achievements.
- Work-study pays students for on-campus jobs, but they do have to work to earn it.
Since work-study funding depends on a school’s yearly budget, the Department of Education recommends submitting the FAFSA early to boost chances of getting it.
A financial aid award letter breaks down a student’s aid package, including loans. But Somero warns that some schools don’t clearly separate “free” aid (like grants) from loans that must be repaid.
“When you get your award letter—whether online or on paper—check if it’s a loan (needs repayment), a grant/scholarship (free money), or work-study (you work for it). Some students think work-study is free, but you actually have to earn it.”
Financial Aid You Must Pay Back
Student loans—federal or private—must be repaid, with varying terms.
- Federal loans (applied for via FAFSA) usually have fixed rates, no co-signer requirement, and deferred repayment until after school. Experts say these are the best option.
- Private loans (from banks or lenders) can have fixed or variable rates based on credit history. Repayment terms vary, so Kim Cole, a financial educator at Navicore Solutions, advises caution:
“Federal loans should be your first choice. But since they often don’t cover all costs, you might need private loans. Look for low (ideally fixed) rates, and read the fine print! If you don’t understand the terms, ask for help—don’t just trust the lender’s explanation.”
Loan Forgiveness (Rare but Possible)
In some cases, loans don’t have to be fully repaid:
- Public Service Loan Forgiveness (PSLF): After 120 payments while working full-time for gov/nonprofits, remaining debt may be forgiven.
- Teacher Loan Forgiveness: Teachers in low-income schools for 5+ years may get up to $17,500 forgiven.
- Discharge options: Available for total disability, death, or school closures.
- Income-driven plans: After 20-25 years of payments, remaining federal loans may be forgiven.
When Repayment Starts
- Federal loans often have a 6-month grace period after graduation or dropping below half-time enrollment.
- Subsidized loans (for undergrads with need) don’t accrue interest until after school.
- Unsubsidized loans start adding interest immediately—if unpaid, it piles onto the loan balance.
The federal government offers eight repayment plans (ranging from 10 to 25 years). If you don’t pick one, you’re automatically placed in the standard 10-year plan.
Final Advice
Paul McKinney, financial aid director at Mississippi State University, says students should start thinking about repayment before taking loans:
“Many wait until graduation to ask, ‘How much do I owe?’ But you need to understand this upfront.”
Paying for college comes with plenty of financial aid options, but families should remember that whether the aid needs to be repaid depends on the type they receive. Loans must be paid back, while grants, scholarships, and work-study earnings don’t.
Experts suggest students max out grants and scholarships before turning to loans. But for many families, those options aren’t enough. Data from U.S. News shows that 66% of 2017 graduates took out loans, borrowing nearly $30,000 on average.
With national student loan debt hitting around $1.5 trillion, Marty Somero, financial aid director at the University of Northern Colorado, says students often end up researching loans and repayment plans on their own—sometimes leading to more debt than they realize.
Finding the Best Student Loans
| Lender | Learn More | Fixed APR | Variable APR |
|---|---|---|---|
| Sallie Mae | [View Disclosure] | 3.45% – 15.99% (with autopay) | 4.37% – 14.71% (with autopay) |
| College Ave | [View Disclosure] | 3.24% – 17.99% (with autopay) | 4.24% – 17.99% (with autopay) |
| Ascent Funding | [View Disclosure] | 3.44% – 15.91% (with autopay) | 4.95% – 15.51% (with autopay) |
“Students get overwhelmed by all the choices,” Somero says. Some end up with so many loans they lose track of who they owe and how much. “Figuring out the best repayment plan takes a lot of research and online reading.”
To help, Somero suggests reaching out to a school’s financial aid office for guidance. The U.S. Department of Education’s website also has info on federal aid options.
Financial Aid You Don’t Pay Back
Grants and scholarships—considered “gift aid”—don’t require repayment.
- Grants (like the Pell Grant and FSEOG) are usually need-based and come from the government, states, or colleges. Filing the FAFSA is key to qualifying.
- Scholarships are awarded for merit, athletics, or other achievements.
- Work-study pays students for on-campus jobs, but they do have to work to earn it.
Since work-study funding depends on a school’s yearly budget, the Department of Education recommends submitting the FAFSA early to boost chances of getting it.
A financial aid award letter breaks down a student’s aid package, including loans. But Somero warns that some schools don’t clearly separate “free” aid (like grants) from loans that must be repaid.
“When you get your award letter—whether online or on paper—check if it’s a loan (needs repayment), a grant/scholarship (free money), or work-study (you work for it). Some students think work-study is free, but you actually have to earn it.”
Financial Aid You Must Pay Back
Student loans—federal or private—must be repaid, with varying terms.
- Federal loans (applied for via FAFSA) usually have fixed rates, no co-signer requirement, and deferred repayment until after school. Experts say these are the best option.
- Private loans (from banks or lenders) can have fixed or variable rates based on credit history. Repayment terms vary, so Kim Cole, a financial educator at Navicore Solutions, advises caution:
“Federal loans should be your first choice. But since they often don’t cover all costs, you might need private loans. Look for low (ideally fixed) rates, and read the fine print! If you don’t understand the terms, ask for help—don’t just trust the lender’s explanation.”
Loan Forgiveness (Rare but Possible)
In some cases, loans don’t have to be fully repaid:
- Public Service Loan Forgiveness (PSLF): After 120 payments while working full-time for gov/nonprofits, remaining debt may be forgiven.
- Teacher Loan Forgiveness: Teachers in low-income schools for 5+ years may get up to $17,500 forgiven.
- Discharge options: Available for total disability, death, or school closures.
- Income-driven plans: After 20-25 years of payments, remaining federal loans may be forgiven.
When Repayment Starts
- Federal loans often have a 6-month grace period after graduation or dropping below half-time enrollment.
- Subsidized loans (for undergrads with need) don’t accrue interest until after school.
- Unsubsidized loans start adding interest immediately—if unpaid, it piles onto the loan balance.
The federal government offers eight repayment plans (ranging from 10 to 25 years). If you don’t pick one, you’re automatically placed in the standard 10-year plan.
Final Advice
Paul McKinney, financial aid director at Mississippi State University, says students should start thinking about repayment before taking loans:
“Many wait until graduation to ask, ‘How much do I owe?’ But you need to understand this upfront.”