Top 11 Student Loan Mistakes to Avoid

When it comes to student loans, you would hear yourself saying, ‘I wish someone had told me….’ In your bid to obtain higher education, you are always at the risk of stepping into a trap commonly known as ‘student loan’. It’s true that you cannot afford to pay the high tuition prices from your own pockets; student loans are always an easy way out to pay the college fees. But definitely you would not like to find yourself in more debt than you can repay, simply because you made one of these 11 mistakes described below. So here are the top 11 mistakes the students make and the tips to avoid them.

Top 11 Student Loan Mistakes to Avoid

1. Clueless about financial aid:

After visiting a financial aid office for the first time, a former student exclaimed: “Today I came to know that I was eligible for full tuition fee assistance. My parents worked hard to pay off my college fees. If I was a bit more inquisitive then, I could have saved them from the debt burden.” Don’t let the same thing happen to you. Make sure you fill out FAFSA (Free Application for Federal Student Aid) form even if you might not get any money.

Tips to avoid this mistake:

  • Fill out the FAFSA form
  • Start looking for grants and scholarships by using free services like SalieMae,, etc
  • Even if you are already in the college, you can still get grants and scholarships. If you manage to get one, you can use that money to pay off your student loan.


2. Borrowing more than you need:

Do not end up with an amount you cannot afford to pay; keep the student loan under manageable level. You can borrow as much as you can, but you rather not. Students who borrowed the maximum amount of loans during college days ended up in a debt trap.

Tips to avoid this mistake:

  • Borrow only as much is required to cover your tuition, books and accommodation fees
  • Skip beers, nice clothes or big nights out in the town
  • Try to do a side job to pay off for your little necessities or not so little necessities of your life
  • If you have already borrowed more than your needs and spent your student loan on meaningless things, you still have a way out. When students borrow more than they need, the university issues a student loan refund check. You should take the check and pay down your student loan with it.


3. Being unaware of your loan balance:

The borrowers often fail to plan after graduation because they get nervous the moment they graduate. Don’t make this mistake or else you will have to carry the burden of student loan more than you estimated or the worse you can default on a loan.

Tips to avoid this mistake:

  • Compile contact information for the services of each loan
  • Contact each lender/service to know when your first payment is due
  • Choose repayment plans for each loan
  • Decide whether the loan consolidation is worthwhile
  • Record the name and contact info of the representative every time you make a call to the services
  • You should claim the student loan interest deduction on the federal income tax returns.

4. Choosing wrong repayment plan:

Many different types of repayment schemes are available to graduates that they are not even aware of. In fact, selecting wrong repayment policy is one of the biggest mistakes that students usually do.

Tips to avoid this mistake:

  • Enroll in a graduate repayment plan to give yourself time until your income is increased
  • See that your job qualifies for certain student loan forgiveness such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. If you are in medical or law school, you can also have the option for loan forgiveness
  • Invest time in research to find out how you can reduce your student loan payments if you are struggling
  • The Department of Education of United States provides several types of repayment plans. To compare those plans, you can use repayments estimator
  • If you need advice or want to switch between plans, contact your loan servicer.

5. Not paying extra when you can:

Every month the student will be charged interest on the outstanding principal balance of the loan. Initially, the payments will be applied to interest charges, not the principal. So, the loan balance will decrease gradually. The best way to decrease the student loan amount is to pay more per month.

Tips to avoid this mistake:

  • Make interest payment while at college or during your grace period
  • Use your tax refund to make an additional loan payment
  • Pay few extra dollars onto your monthly loan payment.

6. Missing payment:

Students or borrowers just stop paying when they think they cannot afford to pay the next student loan payment. You would be making a big mistake if you do this. The reason is not making student loan payments is a big deal. It can result in a default that negatively impacts your credit scores, affecting your chances to borrow a loan to buy a car or house. Missing payments or just paying late can ruin the chances of qualifying for a federal program that provides loan forgiveness.

Tips to avoid this mistake:

  • Contact your loan servicer once you are certain that you cannot make the next student loan payment so that your loan servicer can recommend options to reduce and postpone your payments
  • You can switch to different repayment plan where you can pay a manageable amount
  • Sign in for auto-debit that transfers the loan payment from the borrower’s bank account to the lender. It reduces the likelihood of late payment or default payment.

7. Not considering the cheaper or community education:

You might dream of the perfect college, it might be private and/or might be located in a different state. But don’t ignore the subsidized education in front of you. Many in-state colleges have a good reputation. Let’s say, you select a reputed college over an in-state college and end up spending $9,600 a year or $800 a month to pay off your student loan.

Tips to avoid this mistake:

  • Study first two years at an in-state school or community college and then transfer to a college that has the same program you are pursuing and finish up your degree.
  • If you want a specialized degree, spend first two years earning general educational credits and then go for the specialized degree.

8. Failing to claim the student loan interest deduction:

Students can reduce up to $2,500 in interest on federal and private student loans. If you have a student loan, you can get an exemption on your income. This means you can reduce the borrower’s adjusted gross income (AGI).

Tips to avoid this mistake:

  • You don’t have to itemize to get the student loan interest reduction
  • In case someone else makes the payment on your behalf, you still can make third-party interest payments on your tax return.

9. Not graduating in four years:

Yes, college takes a great deal out of you. To get success in college, you need to plan the next four years in college. An extra semester can cost you thousand dollars. Moreover, you may have not paid attention to plan for one more semester. As college fees rise every, it becomes impossible to manage for a student. The extra tuition fees can ruin your budget and your future plans.

Tips to avoid this mistake:

  • Research as much as you can to prevent unexpected expenses in the future
  • Complete a course load of 15 to 18 credits each semester
  • Enroll in May and summer sessions to catch up or get started
  • Make full use of the academic advisory body available to you
  • Decide on early major and try to stick to it
  • Seek professional help when you counter problem.

10. Missing out on government deals:

The biggest mistake students make is by not taking full advantage of the federal direct student loans. Instead of going after the government-sponsored loans, they secure a higher-interest alternative students loan that offers limited terms, whereas, federal loans are packed with incentives along with fixed interest of 4.66 percent for undergraduates and 6.21 percent for graduates along with a six-month grace period after completing his or her graduation. In fact, under righteous conditions, the government can actually forgive your loan but the private lenders cannot.

Tips to avoid this mistake:

  • Federal loans are given only when you demonstrate financial need
  • The amount you receive is determined by calculating estimated family contribution (EFC) so calculate it first before applying for a loan
  • To apply for federal students loan, you need to submit a FAFSA application that is available at
  • You should estimate the cost of college education before applying for a federal student loan.

11. Counting on bankruptcy discharge:

Hoping for a bankruptcy discharge will land you in more trouble. Very few borrowers each year succeed in getting a full or partial discharge of their student loans. You need to undergo an adversarial proceeding and provide proof that repaying the loans represents an ‘undue hardship’ for you. The reason is each judge has a different interpretation of ‘hardship’.

Tips to avoid this mistake:

  • One should demonstrate a present and future inability to repay the debt: how you have to maintain a minimal standard of living for most of the life while repaying your loan
  • You should make a good effort to pay off your loan.

It is important that you remain aware about these 11 mistakes and save yourself from heartache. All you need to do is make some adjustments in your life and adopt some habits before it is too late so that you can shrug off the burden of student loan easily.

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