Student Loans: What I Wish Someone Had Told Me Before I Signed

I still remember sitting in the financial aid office at 18, signing loan documents I barely understood, thinking future me will figure this out. Spoiler: future me had some strong words for past me about ten years later when I was still making payments.

Student loans are confusing by design, I am convinced. So here is my attempt to break it down the way I wish someone had for me.

Federal vs Private – The First Big Decision

This is genuinely important and I see so many people get it wrong.

Federal loans come from the government and they are almost always the better choice. Lower interest rates, more flexible repayment options, and actual forgiveness programs that exist. If you can get federal loans, take those first.

Private loans are from banks and other lenders. They can fill gaps but the terms are usually worse. Higher interest, less flexibility, and good luck if you fall on hard times – they are not exactly known for being understanding.

I made the mistake of taking a private loan my junior year because I did not realize I could have borrowed more in federal loans. That private loan had a variable interest rate that started at 5% and eventually hit 9%. Meanwhile my federal loans were chilling at 4.5% fixed. Live and learn, I guess.

Breaking Down Federal Loan Types

Direct Subsidized Loans

These are the good ones. Only for undergrads who show financial need. The government pays the interest while you are in school at least half-time. That is huge because interest does not pile up while you are studying.

There is a limit though – I think it is around $23,000 total for your whole undergrad. Depends on when you started school.

Direct Unsubsidized Loans

Available to everyone, undergrad and grad, no need requirement. The catch? Interest starts accumulating immediately. Even while you are in school. Even during deferment.

I did not fully grasp this until after graduation when I realized my loan had grown by like $3,000 during school from interest alone. It was technically disclosed but nobody really explained what it meant in practical terms.

PLUS Loans

For grad students or parents of undergrads. Higher interest rates and they do a credit check. My parents took some of these out for me (thanks Mom and Dad) and I still feel guilty about it honestly.

Perkins Loans

These do not exist anymore as of 2017, but if you have old ones you might still be paying them off. They had really low interest – I think like 5% – and were for people with exceptional financial need. Shame they discontinued them.

Private Lenders I Have Dealt With (For Better or Worse)

Sallie Mae – I had one of their loans. Customer service was hit or miss. Mostly miss. But the loan terms were okay for a private loan.

SoFi – Never had a loan from them but I refinanced with them later. They were actually pretty decent and the unemployment protection thing gave me peace of mind during shaky employment periods.

Discover – A friend used them and seemed happy. They have a thing where you can get the cosigner released after a while which is nice if your parents co-signed.

Citizens Bank – Another friend experience. They do multi-year approval so you do not have to reapply every year. Convenient if nothing else.

Repayment – Where The Real Fun Begins

After graduation you get a 6-month grace period before payments start. Use that time to figure out your plan because those months fly by.

Standard Repayment

Fixed payments for 10 years. Simple, pays off faster, costs less in total interest. But the monthly payments can be rough when you are just starting out and making entry-level money.

Graduated Repayment

Starts low and increases every two years. Based on the assumption your income will grow. Which… hopefully? I tried this for a while but kept having to recalculate my budget every two years which was annoying.

Income-Driven Plans

This is what eventually saved me. Your payment is capped at a percentage of your discretionary income. There are like four different versions – IBR, PAYE, REPAYE (now called SAVE I think?), and ICR.

I ended up on IBR and my payments dropped from $400 to about $180 a month. Game changer when I was barely scraping by after a job loss.

The catch is you pay longer and end up paying more interest overall. But whatever is left after 20-25 years can be forgiven. The forgiven amount might be taxed as income though, which is a nasty surprise people do not always realize.

Forgiveness Programs – Do They Actually Work?

Public Service Loan Forgiveness (PSLF)

Work for a qualifying employer (government, nonprofit, etc) for 10 years while making payments on an income-driven plan, and the rest is forgiven tax-free. Sounds amazing.

The reality? For years the approval rate was like 2% because of insane technicalities and paperwork issues. They have supposedly fixed a lot of this recently. A friend just got hers forgiven last year after fighting with them for months. It does work but you have to be persistent.

Teacher Loan Forgiveness

Up to $17,500 forgiven if you teach in a low-income school for 5 years. Some subjects qualify for more than others. My sister did this and it worked out, but she said the schools themselves were challenging. Not for everyone.

Stuff I Learned The Hard Way

Always know your servicer. Your loans might get transferred between servicers and if you are not paying attention you could miss payments. Set up autopay and keep your contact info updated.

Interest capitalizes. If you are on deferment or forbearance and not paying interest, that interest gets added to your principal when you start paying again. Then you are paying interest on interest. It is brutal.

Refinancing can help but it has tradeoffs. I refinanced my private loans at a lower rate which was great. But if you refinance federal loans into a private loan, you lose all the federal protections – income-driven repayment, forgiveness programs, everything. Be careful.

There is always someone to call. When I could not make payments, I called my servicer expecting the worst. They actually put me on forbearance for a few months. It is not ideal but it beats defaulting. They want their money eventually; they would rather work with you than deal with a default.

Bottom Line

Student loans suck but they are manageable if you understand the system. Take federal loans first, understand your repayment options, and do not be afraid to call and ask questions. I spent years more stressed about my loans than I needed to be because I did not understand my options.

And if you are 18 reading this before taking out loans – take a minute to actually read what you are signing. I know you just want to get to college and figure it out later. But a little understanding now saves a lot of headaches in your thirties.