College  |  May 3, 2019  |  Winnie Sun

Winnie Sun’s quick & easy guide to repaying student loans

What you’ll learn
  • The difference between federal and private loans
  • How to figure out how much to borrow
  • How to calculate your future student loan payments

A big part of my job is helping families make smart decisions about paying for college. I always advise starting with free money like college scholarships and grants, but if you’re thinking about taking out a student loan, the first thing you should know is that you’ll have to pay it back with interest. Here’s everything you need to know.

Understand what student loans are

When comparing federal loans vs private loans, the key difference is that federal loans are provided by the government and private loans are provided by banks, credit unions, and other financial institutions.

Each has its own student loan eligibility criteria, application process, and terms and conditions. As a rule of thumb, it’s best to get as much federal financial aid as you can before applying for private student loans.

Figure out how much you’ll owe

If you choose to take out a student loan, your total student loan debt should never exceed what you expect to make in the first year of your post-college job. Do some research and find out what other graduates in your field are earning and how well they’re able to manage their loan payments.

Use a student loan repayment calculator to help estimate what your monthly student loan amount will be. Remember, you'll need to pay back student loans whether you graduate or not—so make sure you're ready to give it your all at college.

Get proactive about paying, if you can

Unsubsidized federal and private student loans usually accrue interest while you're still in school. You can get ahead by making interest payments in school.

If you don't pay off the interest before graduating, it will be added to your original loan amounts. This is called capitalization. Consider using your holiday or birthday money, or even funds you earn from a part-time job, to pay off the interest while you’re in school.

Do what’s best for you

At the end of the day, a student loan is a personal choice, but one that may impact you for years to come. Before you borrow, it's important to understand how loans work so you'll feel ready to make the right choice for you.

footnote Sallie Mae does not provide, and these materials are not meant to convey financial, tax, or legal advice. Sallie Mae makes no claims about the accuracy or adequacy of this information. These materials may not reflect Sallie Mae’s view or endorsement. Consult your own financial advisor, tax advisor, or attorney about your specific circumstances. Reproduction without explicit permission is prohibited.

footnote Please note, Winnie Sun was compensated by Sallie Mae for this article but the views and opinions expressed herein are her own.