Understanding Debt
Understanding debt and repayment options can help students make informed borrowing decisions and prepare for future financial responsibilities. This section includes information on student loan repayment, repayment planning strategies, and tools to help students better understand what borrowing may look like after graduation.
Common Types of Debt
- Student loans: for education
- Credit cards: convenient but high interest
- Auto loans/medical bills: common expenses
Borrowing Tip: If a student needs to borrow for college expenses, federal student loans may be a safer option than credit cards because they generally offer lower interest rates and stronger repayment protections.
Why Repayment Planning Matters
- On-time payments can build credit
- Too much debt can limit your finances
Repayment Tips
- Pay off high-interest debt first to reduce the total amount paid over time (avalanche method)
- Or start with smaller balances first to build momentum and for quick wins (snowball method)
- Pay more than the minimum, when possible, to reduce interest costs
- Know your loan servicer and stay informed about repayment deadlines
- Explore repayment plan options if monthly payments feel difficult to manage
Key Takeaway
Borrow only what you need and have a plan to repay it.
How Repayment Works
When you borrow a student loan, you repay the amount borrowed plus interest after you graduate. Your monthly payment depends on how much you borrowed, your interest rate, and how long you take to repay the loan.
Example: Borrowing $5,000
This example is for illustration only. Actual repayment amounts depend on the loan type, interest rate, and repayment plan.
| $5,000 | 5% | 10 years | about $53 | about $6,364 |
| $5,000 | 5% | 5 years | about $94 | about $5,661 |
What this means
A lower monthly payment can feel more manageable now, but stretching repayment over a longer period usually means paying more in total over time.
Explore helpful resources to better understand your student loans and repayment options.
Use the Loan Simulator to compare plans and find the best repayment strategy for your situation.
Loan Repayment Options with Loan Simulator
Discover programs that may allow you to reduce or eliminate your remaining loan balance.
Loan Forgiveness Program