No one told Jessica Jacho in high school what she needed to know about student loans — how much to take out, what types to take out or how to apply for it.
Jacho, a junior at Monmouth University in West Long Branch, New Jersey, has roughly $60,000 of debt with several years of school ahead of her.
As a first-generation college student, she has two more years to complete her degree and plans to spend three more years in veterinary school, which can potentially push her student loan debt over $100,000.
"When I was in high school, I actually didn't quite know a lot about student loans, and I didn't really know much about financial aid," Jacho said.
Jacho is not alone in how much student loan debt she's accumulated.
By the end of 2021, the Federal Reserve reported the total amount of student loan debt in the U.S. reached nearly $1.75 trillion, which has grown more than 80% in the last decade.
It will also take the average borrower 20 years to pay back their student loans, according to the Education Data Initiative. The study shows graduates in 2022 are projected to take 10 years to pay back roughly $45,000 of debt if they make monthly payments of $345.
But the cautionary tale is the more you owe, the longer it will take to pay off.
As national student loan debt skyrockets, here are tips from experts on everything you should know about your student loans before and after you take on debt.
Know what you are getting into
Before you sign up for student loans, know the terms of your loans, know the exact amount you're taking out, know your deadlines and exhaust every possible scholarship or financial aid option before you take out student loans.
Jacho did exhaust scholarship opportunities, which amounted to $5,000 her first year in school, but it wasn't enough to offset the continued costs of higher education.
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While you're still in high school, the first stop in your scholarship hunt should be your guidance counselor's office. Counselors have access to scholarships specific to students in their schools.
Your next stop for scholarships, and before and after you're in college, are online scholarship websites such as Fastweb, Going Merry and Cappex. You can find an array of scholarships based on factors like your achievements in high school and your diverse background.
Many students like Jacho go into college with some scholarships, but don't know how to handle student loans when the scholarships run out.
To find out how student loans work and how much you should take out, the U.S. Department of Education offers online resources through the Federal Student Aid office. Debt.org and American Education Services are also online resources to help manage debt.
Also, make sure to meet deadlines for scholarship applications and student loan acceptance, whether it is through your university or through an outside program. Missing a deadline could mean the difference in paying thousands of dollars. And, if you can't pay that money, it could wind up in your account being put on hold and you won't be able to resume attending classes until it's paid off.
Nele Langhof, a first-generation immigrant and first-generation college student from Germany, said when she was applying to colleges, the entire education system and loan system was completely different, so she and her parents were lost on how much it cost to go to college.
"By the time, I was actually in [college] and my loans started coming in, I think that we were all surprised at the number associated with those," said Langhof, who is now a proposal coordinator at the Better Communities Collaborative in Athens, Georgia.
Langhof also had scholarships in college, but it still left her roughly $45,000 in debt.
"My biggest advice for college students is to hustle and grind as much as you can before you enter the real world and pay as much you can on your student loans before you graduate," Langhof said.
Know the rules and numbers
As with most things, once you take out student loans, there's no going back.
The best place to start is familiarizing yourself with the rules of your specific student loans, said Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
"Now that you have school loans and you've got to deal with them, it's important to understand what types of loans you have," McClanahan said. "There are federal loans and then there's private loans, which are very different."
If you take out federal loans through your university or college, make sure to be familiar with the loan provider and access their website to track how much you owe while you're in school — same for your private loans.
With your federal loans, McClanahan said familiarize yourself with the types of loans you have which can include direct subsidized loans, direct unsubsidized loans, parent PLUS loans and graduate PLUS loans.
Subsidized loans are for undergraduate students only and are based on financial need, according to the Federal Student Aid office. They are beneficial to the borrowers because the federal government pays the interest for you while you're in school at least part time and for the first six months after you graduate.
Unsubsidized loans are for undergraduate and graduate students, and they are not based on any financial need, according to FSA. But the borrower is responsible for paying back interest on the loans.
McClanahan said you should stick with your federal loans as much as possible before taking out private loans.
"With federal loans, you can get some loan relief to do alternative payment plans," McClanahan said. "Like the extended payments, income contingent repayment, or the 'pays as you earn' plan, these are all programs that people can look up on how to pay that federal loan."
With private student loans, you don't get the same deals as federal loans, McClanahan said. Private loans are commonly offered outside of universities, through banks and credit unions.
Winnie Sun, managing partner at Sun Group Wealth Partners in Irvine, California, said borrowers should also pay close attention to interest rates because it is going to dramatically add cost to your student loans over time.
Before the federal pause on student loan interest and repayment, interest rates on federal loans ranged from 3.73% to 6.28%, according to FSA.
Sun said borrowers should know the exact interest rates on each of their loans before and after taking out loans.
"The thing you want to do is understand the rules of each of your loans, and then you start off trying to pay off the highest interest rate loans first, which tend to be the private loans," McClanahan said.
Sun said borrowers should also be aware of how much their total debt is and what their average payments will be.
"Most people have more than one loan, and I recommend creating a really simple spreadsheet," Sun said. "Do it on Google Sheets or Excel, and just write down what the loan is, what the amount is and the interest rate that you currently owe on that loan."
Mistakes to avoid
Sun said the biggest mistake to avoid is not making your minimum monthly payment.
"At least pay the minimum amount each month, and make that your goal," Sun said. "If you can, maybe do some gig work or do a little freelancing, whatever you need to do, temporarily, to try and pay extra payments, but you have to make your minimum payment."
Sun recommends working your minimum monthly payment into your budget, as you would with your car payment or electricity bill. While the moratorium is still in place until May 1, Sun said borrowers should still plan for their student loan payments to be incorporated in their monthly budgets soon — do not assume that it will be extended or that student loan forgiveness will happen.
If you don't make the minimum payment, it can affect your credit score and your ability to buy a house or car, and it could potentially prevent employment opportunities if an employer runs a credit check on your background.
Sun said it is a mistake to let your monthly payment go unpaid, without reaching out for help and talking to people about it.
"Communication is key. Reach out to your loan servicers and let them know this issue. You're not going to be the only one," Sun said. "Have these conversations early and don't wait until the last minute to see if you can find help on this."
Although Langhof didn't miss a monthly payment, her student loans still prevented her from co-signing for a home with her partner because her student loan debt was a liability.
"If you have outstanding debt that you're not paying, you're a liability for car payments, for insurance and for housing. Don't put yourself in that position," Langhof said. "Don't put yourself behind if you can pay the minimum, that's why it's called a minimum."
Think big picture
While you're in college, it is hard to think past this week's exam or the essay that's due tonight that you haven't started on yet, but the choices you make while you're in school have long-term ramifications.
"One big mistake a lot of students make when they're starting out in college is they don't really think about the cost versus how much money they're going to make with the degree they have," McClanahan said.
For students entering college, they should research how much a starting salary is in the field of their desired degree and try to only take out loans that equal that starting salary.
"It's really important for people, as they're in college, to make sure that they know what kind of jobs they're going to have available when they get out of college," McClanahan added. "So they don't overborrow for a degree that doesn't pay enough to get the money back."
Some college students get into student debt without realizing how it will affect their future life plans. Like Langhof, it affected her ability to buy a house, but it could also push back other major life events like getting married or even starting a family.
Eighty-one percent of adults with student loans say they have delayed major life events because of their debt, according to CNBC and Acorn's recently released Invest in You Student Loan Survey conducted by Momentive. The online poll was conducted Jan. 10-13 among a national sample of 5,162 adults.
Student loan debt can be even more crippling for women and people of color. According to the CNBC and Acorn survey, women are more likely than men to have student loan debt, and the survey found Black women and Hispanic women have the highest amounts of student loan debt.
The survey found 11% of white men, 17% of white women, 15% of Black men, 31% of Black women, 10% of Hispanic men and 19% of Hispanic women have student debt.
Loan forgiveness could be life-changing
As federal student loan forgiveness remains up in the air and the moratorium on repayment is set to end May 1, many borrowers are left hoping for the best but preparing for the worst.
Some students have even taken a laissez-faire attitude on student loan debt. As a 24-year-old graduate student who finished an undergraduate degree in 2020, a lot of my peers are recent graduates who haven't made a single student loan payment due to extensions caused by the Covid-19 pandemic.
One friend has said to me that they don't have any plans at all on repaying their student loans, and they said they "just can't think that far ahead" because they have too many other bills to pay.
It can be a contentious debate on the economic effects that student loan forgiveness could have on the U.S. economy, but the varying proposed amounts in forgiveness — $10,000, $50,000 or more — could all mean tremendous relief for borrowers.
If the federal government does forgive any amount of debt, it could be life-changing for borrowers from lower socioeconomic backgrounds, like Jacho, who is a first-generation, Latina student, a demographic most adversely affected by student loan debt.
"All I know is I would be crying in tears knowing that all my debt is paid," Jacho said. "I'll be able to sleep better at night if I didn't have so much debt that I have to pay."
Student loan forgiveness could also have a tremendous effect on borrowers' mental health. More than 60% of borrowers say student loan debt has negatively affected their mental health, according to the CNBC and Acorns survey.
"If all of my debt was paid off, I'd basically be okay with my career and move forward with life," said Jacho.
"I hope there is loan forgiveness, but I think that it's going to take a while to sort out," Sun said. "Anything pertaining to the government usually takes a little bit longer. Although, we've seen promise with the current administration actually doing it."
Here's a checklist to help you be smart about the loans you take out, keep track of them and pay them back as quickly as possible:
- In high school, apply for scholarships and learn about student loan types.
- Research how much a starting salary could be for the degree you want to earn.
- In college, contact your school about deadlines for accepting or denying different student loans available to you.
- Only take out the student loans you absolutely need.
- Find out interest rates on your student loans and keep track of your total debt on a spreadsheet.
- Pay back student loans while you're still in school as much as you can.
- After you graduate, incorporate your minimum monthly payment in your monthly budget.
- Pay more toward your loans as frequently as you can.
- Ask for help if you need it — contact your student loan provider.
- Research relief programs and alternative repayment options based on your financial situation.
"College Money 101" is a guide written by college students to help the class of 2022 learn about big money issues they will face in life — from student loans to budgeting and getting their first apartment — and make smart money decisions. And, even if you're still in school, you can start using this guide right now so you are financially savvy when you graduate and start your adult life on a great financial track. Mikaela Cohen is a graduate student at the University of Georgia pursuing a master's degree in journalism. She is currently an editorial intern for CNBC Make It. The guide is edited by Cindy Perman.
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