Common Mistakes When Borrowing Undergraduate Student Loans

undergrad student loans mistakes

BIG Ideas:

  • Borrowing more than you need for college could cause you to amass debt that could impact your ability to borrow to meet your goals in the future, like buying a home or car.
  • Exhaust all federal aid before you apply for a private student loan.
  • Private undergraduate student loans can help you bridge the gap where federal aid and your savings leave off. 

From math test miscalculations to snooze-button slips, we all make little mistakes. However, if you’re planning for college and need undergraduate student loans, there are a few mistakes that can cost you.

At Brazos, we want your college journey to be affordable. So, we’re sharing a few money missteps and helpful hints to empower you to make informed decisions about undergraduate student loans.

Fasten your nose clip, and let’s dive in.

  • Overextending yourself. You want to attend college to give yourself a brighter financial future. What you don’t want to do, though, is take out loans for undergraduate school that will force you to borrow more than you need and give you debt regret later in life.

    Pro Tip: Make sure you understand the cost of attendance and be realistic about what you can afford, apply for scholarships, and find ways to reduce expenses. For example, could you attend a community college for the first two years and then transfer to the four-year school of your choice?
  • Not applying for financial aid. Financial aid is generally need-based, but that doesn’t mean you shouldn’t apply for it, even if your family has a healthy income and you don’t think you’ll qualify. Financial aid can come in the form of work-study and scholarships and grants that you don’t have to pay back (FREE MONEY!).

    Pro Tip: To apply for financial aid, complete the Free Application for Federal Student Aid, or FAFSA, as it’s known on the street. Make sure you exhaust all federal aid options before you apply for private loans. Also, if you’re a parent looking to help finance college, be informed about some of the pitfalls of federal PLUS loans.
  • Not understanding repayment options. When you have federal or private undergraduate student loans, you have options for paying back what you owe. For example, with federal undergraduate loans and many private loans, you may defer payments until 6 months after graduation, when you’re likely to have a job and steady income. Understand, though, that if you choose that repayment option (unless you have subsidized federal undergraduate student loans), interest will accrue while you’re in school and must be paid back when you enter repayment. So, you’ll end up paying more.

    Pro Tip: Do your homework to bone up on the types of loans you may have and the repayment options, so that you can choose the right one for you.
  • Not applying for private loans. By now, you’ve probably figured out that college isn’t cheap. With the high cost of tuition today, you may have a gap where financial aid and your savings leave off. When that happens, you can apply for undergraduate private student loans. Unlike federal undergraduate student loans, which are based on need, private undergraduate student loans are based on your creditworthiness and income.

    Pro Tip: Federal loans offer certain repayments options and forgiveness that private loans do not – make sure you do your homework. Learn more about the difference between federal undergraduate student loans and private undergraduate student loans.
  • Not shopping around for private loans. Another thing to note about private loans is that rates, fees, and terms can vary significantly by lender.

    Pro Tip: Make sure you shop around for private lenders. At Brazos, for example, we are a non-profit private lender, which allows us to offer loans with great rates and no fees.
  • Choosing the wrong co-signer. If you need a private loan and don’t have a strong credit history or steady income, you’ll want to apply with a co-signer. A co-signer is a person of your choice who agrees to share responsibility for the loan with you if you can’t make payments.

    Pro Tip: Learn more about co-signers and how to choose the right one for you.
  • Not applying for scholarships or grants. You, your parents, and your friends may have different opinions about different colleges. One thing everyone can agree on, however, is the benefit of having free money to help pay for college. That’s exactly what scholarships and grants are. You could receive money based on your grades, interests, and skills, such as athletic prowess or musical abilities.

    Pro Tip: Learn how to find scholarships and grants, including scholarships available at Brazos, and start applying.
  • Delaying or missing payments. In the world of borrowing, tardiness matters. One of the biggest mistakes you can make is not paying your student loans on time or, worse, not paying them at all. You won’t just incur costly fees; you’ll also damage the credit score you will need later in life to get an apartment, buy a car, or purchase a home. What’s more, if you have a co-signer, you could put them at financial risk.

    Pro Tip: Arrange to have your payments made automatically, so you don’t forget. If you experience financial difficulty that could impact your payments, contact the servicer of your loan immediately.

Brazos is Here to Help You Get the Private Loan You Need

For more than 40 years, Brazos Higher Education has been helping make education more affordable for students. As a Texas non-profit, we offer great rates and no fees on private loans for undergraduate students. Contact us to learn more.