If you’re planning to use student loans to cover college costs this coming term, you’ve likely already completed the FAFSA. Hopefully you’re also beginning to consider how you’ll manage repayment.
After filing the FAFSA, you’ll receive an award letter that outlines how much aid you’re eligible to obtain. From there, you must decide how much of that aid to actually accept.
Have you thought about what you’ll do if you’re offered more money than you require?
It’s easy to assume that won’t be an issue — who worries about receiving too much?
Yet it can be a concern. Any funds you borrow must be repaid, usually with interest attached.
My family’s financial situation qualifying me for more aid than I needed meant I accepted the full amount, and today I’m carrying $58,000 in student loan debt.
Below are a couple of crucial cautions I wish someone had shared with me earlier so I wouldn’t have accumulated so much borrowing:
1. Don’t Accept Every Dollar of Financial Aid If You Don’t Actually Need It
You’re not obligated to take the total amount of aid offered.
When an award exceeds your needs, it can be tempting to accept it all — it feels like free cash!
But borrowing is absolutely not free.
Unless you truly need that money to cover costs, don’t use it as an excuse to skip work.
If you can handle living expenses by working part-time during semesters or full-time over breaks, you’ll sidestep substantial loan hassles and interest charges.
Figure out how much support you genuinely require each term for tuition and living costs, and how much you can contribute from your own savings or earnings.
Then accept aid in this recommended sequence:
- Scholarships and grants (no repayment required)
- Work-study (earned income)
- Federal student loans (borrowed funds)
- State or institutional loans (borrowed funds)
- Private loans (borrowed funds)
2. Don’t Spend Loan Refunds on Luxuries
If you accept funds and later receive a refund check you don’t actually need, remember you aren’t obligated to squander it.
Would it be tempting to pay for that spring break trip with friends or splurge on a shopping binge? Absolutely. But you’ll be saddled with the cost of that indulgence for years after, thanks to interest and principal repayment, and it may not feel worthwhile later.
(Then again, maybe it will be — that’s your decision. I just want you to have the facts now so you can decide consciously rather than regretfully.)
Take caution from others’ missteps — here are some irresponsible ways students spent their loan refunds that left them worse off later.
Congratulations — You’re Graduating!
You’re heading into an exciting new chapter. Many people look back on college as some of the best years of their lives.
Just… please make thoughtful financial choices now so those memories don’t come with long-term financial pain.
Leave the impulsive decisions for things that don’t create lasting bills — maybe don’t get that ankle tattoo sophomore year as a financial decision.
Article by Morgan Ellis. Morgan covers personal finance topics and contributes to Savinly, writing with a touch of humor where it fits.
