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Things to Consider Before Getting a Student Loan

You worked hard during high school. Got good grades, participated in extracurricular activities, maybe even found time to give back to your community. All of that hard work paid off because you were accepted by one of the colleges on your wish list. But now you need to figure out how you’re going to pay for it.

It may be tempting to rely on student loans to pay for tuition, room and board, fees, books, and other education expenses. And you certainly wouldn’t be alone if you did. Americans owe over $1.64 trillion in student loans, and this debt is spread out among roughly 45 million borrowers. Deciding to become one of these millions of borrowers to finance your education isn’t a decision to be made lightly—especially given eleven percent of Americans who have student loans are more than 90 days delinquent or in default.

Before you decide to take out a student loan to fund your college education, here are six things to consider.


1.  Scholarships and grants could help defray costs.

It may not be as easy as filling out a loan application, but researching and applying for grants and scholarships could contribute to reducing the amount you have to pay out of pocket because you don’t have to repay them after you graduate if you meet all of the associated requirements. Many programs have specific eligibility requirements, so do a little legwork—including spending some time on student aid websites—to research and find the ones for which you qualify. Then be sure to follow the application instructions carefully and submit your application before the deadline. You don’t want to miss out on any great opportunities because your application was late.

Don’t forget to check out the Federal Work-Study program, if you’re eligible. It gives college students in need part-time jobs to earn money for education expenses.


2.  Your earnings potential will likely affect your ability to repay your loans.

All jobs do not have the same earnings potential. It’s essential to think about your job prospects and how much money you’re likely to make when you graduate before getting too far in debt to finance your education. If you have plans to be an investment banker or doctor or some other profession with high earnings potential after college, taking out loans to finance your education may make sense. On the other hand, if you plan to pursue a career in social work or some career with lower earnings potential, getting started in the “real world” with a large amount of debt hanging over your head will definitely make things more challenging.


3.  There are less expensive options for education out there to consider.

You can get a college degree without going to an expensive private college or university for four years. It may not be your dream school, but attending a state university in your state of residence could save you thousands of dollars while earning your degree. Or perhaps consider starting out in a community college. You could attend a community college for a year or two and then transfer to a public university to finish your degree, which should definitely help save you some money.


4. Get a job.

Getting a job can help offset the cost of college in multiple ways. First, some employers offer tuition reimbursement as a benefit to their employees. Consider working for an employer that’ll pick up the tab for your education. Or work for a year or two after high school to help save money for college. You can also work fulltime while attending school part-time, or work a part-time job while attending school fulltime. It may take you longer to get your degree, but it’ll help reduce the amount you owe when you graduate.


5.  You can choose between federal and private student loans.

If you need to get a loan to cover all or part of the cost of college, you have two options to choose from: federal and private. Be sure to research both to find the type that’s right for you.

Federal loans are backed by the government and have fixed interest rates and income-driven repayment plans. They are generally less expensive than private student loans, which are offered by banks, credit unions, state agencies, or schools. Federal student loans don’t require a credit check, while private student loans do.

If you take out a federal loan and are struggling to make your payments, you typically have more relief options than with a private loan. And federal loans are eligible for loan forgiveness, whereas most private loans generally aren’t.


6.  Understand the interest, fees, and repayment terms of a loan.

Before getting a loan, it’s important to carefully review the terms and conditions so you understand how it will accrue interest, which fees will be charged, and what repayment options you have. You also want to find out when you have to start repaying your loan. In general, you must begin paying back your loan if you leave school (whether you graduate or not) or drop below a part-time schedule. 


As the cost of a college education has increased in the last few decades, more people have turned to student loans to finance their education. While a college degree can provide more career opportunities than a high school diploma, it’s important to understand both the risks and the benefits of taking on student loan debt because it could impact your finances for years—or even decades—after you graduate.

About the author:

Jennifer Brozic

Jennifer Brozic began her writing career at seven years old, when she scribed the epic tale of her kite-flying (and skyward-looking) uncle crossing paths with a deep hole in a sandy beach. After earning a degree in journalism, Jen worked in the insurance and financial services industries before earning a master’s degree in communication management. She left the nine-to-five corporate world in 2010 and has been freelance writing ever since. Her areas of expertise include insurance, financial planning & budgeting, and building credit.

This material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor, attorney or financial advisor. Readers should consult with their own tax advisor, attorney or financial advisor with regard to their personal situations.