Student Loans: 3 Common Mistakes Students Make

Common mistakes people make with their student loans can result in damaged credit or may leave students to repay more than they should on loans they didn’t need. Even the best intentions can lead to significant financial errors. Here are three common mistakes students make when navigating student loans.

1. Borrowing Too Much

For students who qualify for financial aid, scholarships and grants--or who receive financial support from their families--the full amount offered by a student loan provider may be more than they need. It can be tempting, however, for students to borrow the full amount and spend it on entertainment and luxuries rather than education.

2. Consolidating Federal Loans with Private Loans

Student loan consolidation allows individuals to combine their student loans and make only one monthly payment. Although it is possible to consolidate federal loans and private loans, it is often unwise to do so. Federal student loans have more competitive interest rates than private student loans. Individuals who consolidate federal loans with private loans must use a private lender and often lose these rates. In addition, deferment and forbearance options may not be available from a private lender.

3. Avoiding Repayment

When a student fails to repay his lender, his student loan falls into default. Defaulted student loans continue to accrue interest and can follow an individual indefinitely. Not only does defaulting on a student loan damage a student’s credit rating, but the unpaid loan can be discharged only in bankruptcy under very limited circumstances. If a lender files suit against a consumer for defaulting, the individual may face consequences such as property liens, seizure of his bank accounts or wage garnishment.