While it might be useful to look at the different federal student loan repayment options and how they impact monthly loan bills, students should keep in mind that these can change over time. The Trump administration is phasing out some payment plans and introducing others.
Read the College's Financial Aid Package Carefully
Schools have long been criticized for sending financial aid offer letters that don't clearly separate which aid needs to be paid back and which doesn't. This can cause some people to mistakenly believe that a federal student loan listed in the offer is actually a scholarship or grant.
That misunderstanding can make it appear as if your student only needs to take out one relatively small loan to cover the leftover costs not covered in the offer. In reality, that gap would have to be filled with a second loan, and you or your student could end up borrowing considerably more than you planned.
"People fall for this over and over again," says Goodman. "They don't see that there's a loan tucked in there, and they're going to have to pay that back. And any additional money they borrow is going to be a second loan on top of that loan."
Plan for Four Years, Not One
Student loans are often referred to as the last funding option, only to be used after all savings, scholarships, grants and work study avenues have been tapped.
And if you've invested money in a 529 account or tucked away college savings in a high-yield savings account, you may naturally want to exhaust those funds before your student takes out loans. But this can actually end up costing you or your child, experts say.
The federal government caps the amount your undergraduate student can borrow each year, and it is not a particularly high limit when compared with the cost of many colleges. Students can borrow up to $5,500 in their first year, $6,500 in their second year, and then $7,500 in their third year and beyond, up to a total limit of $31,000.
But those loan amounts don't carry over from year to year. Essentially, if you don't use it, you lose it.
Financial advisors say some families pour their savings in up front, only to run out when their student is in their third or fourth year. At that point, the federal loan might not be enough to cover the year, and the student and parents may have to take out higher-interest private loans or federal parent loans, getting saddled with more debt than they needed to take on.
"The problem is you can't double or triple up on those loans later on," says Elder. "It's really about taking that full-resource picture and figuring out how to pay for four years, not how to pay for today."
Plan for Four Years, Not Five or Six
While spending an extra year or two in college may be appealing to some, it can add to your debt burden after school. Goodman tells parents she works with to explain to their students that finishing in four years is the goal.
Extra years mean extra expenses, and those expenses come at a time when your student may have hit their borrowing cap, meaning funding those final years would likely require taking out pricier loans.
"If you take more than four years to finish, you have extra dorm expenses or extra housing expenses, you have extra food expenses and you delay getting into the workforce at a college loan level by a year or two years," says Goodman. "Nobody talks about this, but it’s really important to bring home to your child the importance of graduating in four years."
Don't Go Above the Federal Borrowing Cap
Finally, the experts we talked to say it's typically a good practice for your student to avoid borrowing more than the federal limit. Federal undergraduate student loans offer lower rates and more generous benefits than most private lenders.
Federal loans also come with the potential for loan forgiveness and income-driven repayment options that can provide relief if you're struggling to make payments.
“There’s a break point at which it gets a lot more expensive," says Goodman. "For students, that comes when you exceed the max that the government will lend you."
