9 Common Student Loan Mistakes and How to Avoid Them in 2024

9 Common Student Loan Mistakes and How to Avoid Them in 2024. A student loan is a type of loan given to students to help them pay for their education and other related fees like books, living expenses, and tuition. 

Students can get loans either from the state government, private companies, or the federal government. Statista (2020) reveals that about 92% of student loans are federal loans rather than private or state loans.

A few places that give student loans include American Express, Bank of America, Student Loan Hero, Vermont Student Assistance, Wells Fargo, Funding University, FedLoan, and many others. 

In this article, I discuss the nine common student loan mistakes and how you can avoid them in 2024.

Common Student Loan Mistakes and How to Avoid Them in 2024: Top 9

Below here are the top nine student loan mistakes and how to tackle them:

1. Borrowing more than what you need.
2. Little or no payment to the loan type.
3. Failure to update your contact information with the loan provider.
4. Borrowing private student loans first.
5. Using loans to fund your living expenses.
6. Failure to fill out the FAFSA form.
7. Postponing payments when not necessary.
8. Knowledge of interest rates and how to calculate it.
9. Not meeting a financial aid counsellor before borrowing.

1. Borrowing more than what you need

Borrowing more than what you need is the most common student loan mistake in 2024. Student loans bridge the gap between the cost of your education and the money you have. So, you do not have to borrow or take more debt than is necessary. 

You can get a part-time job to pay for your day-to-day expenses while the loan is used just for your education. This is necessary because the less money you borrow, the less money and interest you have to pay back.

Also, take note of your average salary in your field of choice to know how much you can pay on monthly loan payments.

2. Little or no payment to the loan type

There are various loan types for students like direct subsidized loans, direct consolidation loans, and direct plus loans. These loans come with fixed or variable interest rates. 

As a student, you must pay attention to the type of loan you are getting. Loans with a fixed interest rate do not change during repayments, even when the Federal Reserve may increase or decrease the prime rate. 

On the other hand, loans with variable interest rates change from the outset of your loan to the repayment period. 

Hence, students have to choose loans based on the variable rates, fixed rates, and their capacity to pay back. 

3. Failure to update your contact information with the loan provider

Failure to give loan providers your contact information is also among the nine common student loan mistakes in 2024. You need to give your updated contact information, that is, phone number, email address, and mailing address to your loan provider.

With updated contact information for your loan provider, you can receive important changes like new repayment plans, loan forgiveness options, loan servicer, or payment address.

Tip: Not getting a bill or statement from your loan provider because you didn’t update your contact information is not a good excuse for missing your payment period.

4. Borrowing private student loans first

Many students do not know that there is a difference between private school loans and federal school loans. Students should get loans from the federal government first. 

Federal student loans are less expensive than private loans. These loans have good repayment terms and are always available. Also, federal student loans have fixed interest rates with no credit history.

The only time you can go for private student loans is if you are no longer qualified for federal loans. Also, take private student loans if you have reached the limit to applying for federal loans.

5. Using loans to fund your living expenses

Student loans are not meant to fund your living expenses like rent, groceries, and other college expenses. These loans are not for taking trips and vacations. If you use loans to fund your living expenses, you are simply creating more expenses for yourself.

However, you can simply fund your living expenses by getting a part-time job while studying. Also, this job can help you avoid extra loan interest.

6. Failure to fill out the FAFSA form

The first step to getting a student loan from the federal government is to fill out the FAFSA form. 

Free Application for Federal Student Aid (FAFSA) is simply the official form to apply for federal loans to pay for college or university education. This aid is used by many individual colleges, universities, and states to make financial aid decisions. 

Financial aid is money you don’t have to refund, for instance, scholarships, work-study awards, and grants.

With the FAFSA form, the federal government will know how much financial aid to give you depending on the school you are going to, your family income, and other factors.

Tip: The more financial aid you receive, the fewer loans you will need to borrow.

7. Postponing payments when not necessary

Constantly postponing payments when it’s not necessary is another common student loan mistake in 2024. You do not need to postpone your loan repayment when you have the money to pay. 

If you keep on postponing payments, you will only accumulate interest, which you may not be able to pay later.

8. Choosing a long repayment-term plan

Students always choose the lowest monthly repayment plan than the highest repayment plan. But, the lowest monthly payment plan has the longest repayment term which increases the total interest you will pay.

So, you must understand the loan repayment details before applying for a loan. With this understanding, you will save money and time. 

You can ask your loan provider which repayment plan is best for you. There are many repayment options depending on your level, for instance, income-based repayment plans. 

9. Not meeting a financial aid counsellor before borrowing

A financial aid counsellor is an excellent resource person who can aid you in making the right decisions when paying for your education. These counsellors have years of experience in financial aid and they can help you apply for grants and scholarships. 

So, before you apply for a student loan, book an appointment with a financial aid counsellor around your location.

Conclusion 

The article above shows the top nine common student loan mistakes and how to avoid them in 2024. Other mistakes include not applying for scholarships, failure to meet a financial aid counsellor before borrowing, and lack of knowledge of interest rates and how to calculate it. Take note of these tips when applying for student loans.