How to Pay for College Now Without Overspending Later
Once classes are in full swing, it’s easy to focus only on the immediate costs of college. But taking a few minutes to consider the long-term impact of your borrowing decisions can pay off down the road. Understanding your options today may help you better manage repayment and enjoy greater financial flexibility after graduation.
How Can I Pay for College?
Paying for college often involves combining several funding sources. Depending on your situation, you may use one or more of the following:
- Grants
- Scholarships
- Work-study opportunities
- College savings
- Student loans
Some options can help lower your education costs without creating future debt, while others require repayment after you leave school. For example, loans require repayment, but scholarships and grants typically do not.
Reviewing all available funding sources before borrowing may help you reduce the amount you'll need to repay later.
How Much Should I Borrow for College?
If student loans are part of how you’ll pay for college, think about borrowing only what you need to cover your education costs.
As you review the cost of attendance, keep track of the total during your entire degree period — not just what you'll borrow this semester. Student loans can add up over time, especially if you need to borrow every year you're in school.
Remember, you don't have to accept the full loan amount offered to you. If you need less, you can choose to borrow less.
How Will the Borrowing Decisions I Make Today Affect Me After Graduation?
If you take out a loan to pay for college, you'll need to repay the amount borrowed plus any interest that accrues once repayment begins.
Typically, the more you borrow, the higher your monthly loan payments may be after graduation. Those payments could take up a big part of your budget and leave less money available for savings or handling unexpected expenses.
Making payments on time may help you build credit, while missed payments could lead to additional fees, higher borrowing costs, and damage to your credit profile.
Fully understanding the terms of a loan before accepting it may help you avoid unnecessary costs later.
How Does Interest Affect the Total Cost of My Student Loans?
Interest is the cost of borrowing money. As interest accrues over time, it increases the total amount you repay over the life of the loan.
The type of student loan you choose may make a difference in your total cost. For example, with a Direct Subsidized Loan, the federal government covers certain interest costs while you're in school and during your grace period. With a Direct Unsubsidized Loan, interest begins accruing as soon as you get the loan.
If interest builds up and goes unpaid, your loan balance may grow.
How Can I Reduce Student Loan Costs?
Try these strategies to help lower the total amount you pay over the life of your student loan:
- Compare repayment plans: Different repayment options may affect your monthly payment and total borrowing costs.
- Enroll in automatic payments: Some loan servicers offer a small interest rate discount when you sign up for autopay.
- Pay extra when possible: Even small additional payments can reduce interest costs and help you pay off your loans faster.
- Pay as soon as possible: Paying on loans prior to graduation and before official payments are due may reduce your overall student loan balance.
- Explore forgiveness programs: Borrowers working in certain professions or public service2 roles may qualify for loan forgiveness or repayment assistance programs.
- Consider refinancing: Replacing existing loans with a new loan may lower your borrowing costs.
IMPORTANT INFORMATION: Please note that if you refinance qualifying federal student loans, you’ll no longer be eligible for certain federal benefits or programs and waive your right to future benefits or programs offered on those loans, which may include, but aren’t limited to, Public Service Loan Forgiveness, Income-Driven Repayment plans, forbearance or certain forgiveness options granted to Parent Plus borrowers. Please carefully consider your options when refinancing federal student loans and consult Studentaid.gov for the most current information.
What Changes Could Affect My Student Loan Payments?
Major life events might change your repayment options and monthly payment amount. It's a good idea to review your student loan payment strategy when you:
- Get married: Household income may affect some repayment plans.
- Grow your family: Family size could influence income-driven repayment calculations.
- Change your income: A job change, a raise, or loss of income may affect your monthly payment.
- Plan for a major financial goal: Student loan payments could affect how much money you have available for goals like buying a home or adding to your savings.
Reviewing your repayment strategy before and after major life events may help you take advantage of available repayment programs and avoid paying more than necessary.
How Can KeyBank Help Me Pay for College?
Paying for college can come with a lot of questions and big decisions. Having someone to help you sort through your options might make those decisions feel more manageable.
If you'd like to discuss your situation, KeyBank offers a free Key Student Loan Consultation1. A specialist can answer questions, explain available options and considerations and help you better understand your student loan choices.