Taking out student loans can lead to regrets, but there are ways to avoid that feeling of dread. The good news is these regrets are largely preventable. Even if you’ve already borrowed, you can avoid some misunderstandings about repayment that can save you aggravation and potentially thousands of dollars. Once you understand the most common pitfalls, you can implement smart financial strategies that will help you feel less trapped.
Student Loan Debt
The average student loan debt in the country is over $42,600. Some students may need to borrow this amount of money out of necessity while others borrow more than they need. And overborrowing is one of the top regrets people have. Just because there is a maximum loan limit doesn’t mean you have to borrow the maximum amount. If you’re still in school, make a budget and clarify exactly how much you need to cover tuition, fees, housing, and other necessary education expenses. Loans should not be used to cover non-essentials.
Another fundamental issue that leads to regret is mistaking “free money” with student loans. Many students have confused gift aid (grants, scholarships) with loans because they did not read their award letters or documents closely.
If you’re still in school, start a file or spreadsheet to keep track of all the money you receive to help pay for college. You’ll want to clearly label each type of financial aid. For example Pell Grant vs. Direct Unsubsidized Loan vs. Private Student Loan vs. XYZ Scholarship, etc. And list the exact dollar amount you’ll be receiving, along with interest rates. When you track everything, it will not only help eliminate surprises later, but it will also give you an understanding of your overall student loan debt.
Student Loan Borrowers
This may be an unpopular opinion, but it may not be necessary to become a student loan borrower in the first place. A major regret that some students have is not putting in more effort to find scholarships or other forms of free financial aid—like grants and work study. Working a part-time job may also be a consideration to help reduce the need for loans. Of course, there is also the question of school selection. Some are simply much more expensive than others when you consider private vs public schools and in-state vs out of state tuition. This may be something worth reexamining.
Higher Education
The costs of higher education have steadily increased over the years, outpacing inflation. And because it’s an expensive investment, it's important to evaluate your expected salary against the amount of debt you may incur to complete your education.
The Department of Education (ED) rolled out a new lower earnings indicator in December 2025. The FAFSA submission summary will now flag any schools whose undergraduate earners fall below a median salary.
Student Loan Balance
Even if you did not over borrow for college, do you know if your loan balance is increasing before it’s time to repay? Have you been paying the interest while you were in school? If not, how much interest will be added to your principal balance after your grace period is over? If you don’t have at least a ballpark figure, you are not truly aware of your student loan balance.
Contact your loan servicer to get your latest figures.
Federal Student Loans
If you need to borrow loans for college, federal student loans should be your primary source. Some students and parents regret borrowing from other programs without making the most of the federal program first. Or they fail to understand how the federal student loan program works, including borrower entitlements.
Be sure to read your promissory note carefully and take notes during your entrance and exit loan counseling sessions. Ask questions, too.
Private Student Loans
Turning to private student loans before exhausting all available federal aid is yet another regret. Private student loans are intended to fill in the gaps when other financial aid falls short. Private loans sometimes carry higher interest rates, and they lack the federal protections offered in the Direct Loan Program. Also, there are no income-driven repayment plans or loan forgiveness.
Income Driven Repayment
A common regret when it comes to Income-Driven Repayment (IDR) plans is signing up for the wrong plan. And with more changes being introduced this year—including the new Repayment Assistance Plan (RAP)—it is important to understand which plan is most appropriate for you.
Another issue is failing to recertify each year. There is an annual recertification process where you need to show proof of annual income (i.e. provide a copy of your tax return) to remain enrolled in an IDR plan.
Discretionary Income
In the Direct Loan Program, IDR plans are calculated based on your discretionary income. This means your loan servicer will look at the difference between your annual income and a calculated percentage of the government’s poverty guidelines. These guidelines are based on your family size and state of residence.
You can avoid regret by not assuming that you don’t qualify for IDR plans. You can apply for an IDR plan online through the Federal Student Aid website, or with your servicer.
Repayment Plan
In addition to specialized repayment plans like IDR, there are other options depending on the type of loans you borrowed. Private loan lenders offer multiple options such as:
- Paying interest only while you are in school
- Entering repayment immediately
- Deferring all payments until after you graduate
- Paying a fixed amount each month (such as $25) while in school
If you are not in a repayment plan that suits you, ask your lender to revisit this so you can enroll in a plan that works for your income. Note: the above-mentioned plans are typical during the in-school period and may vary by lender. Once you enter repayment on private loans, standard repayment is the norm.
That said, some lenders offer refinancing which will allow you to increase your repayment term to up to 20 years. In the Direct Loan Program, you may be able to extend repayment up to 30 years.
Interest Rates
Without knowing your current interest rates, it is difficult to budget and plan for repayment. And if you confuse a variable rate loan with a fixed rate loan, you may be unaware of just how high your rate could get.
Monthly Payments
Your loan balance and interest rate will help determine your monthly payment amount. And facing unmanageable monthly payments is a big regret among students and parents who must borrow for college. Again, you’ll want to know your numbers starting with how much you really need to borrow and how that impacts a monthly payment amount. You can use an online calculator to help you estimate this.
Financial Goals
Everyone has financial goals. After all, a college degree is meant to help you improve your likelihood of obtaining those goals, right? Avoid the pitfall of not having a clearly defined financial goal that will help guide your decisions when it comes to student loans.
