Understanding Student Loans: What You Need To Know Before College

Ryan Fardy, Walter Payton, Senior, Spring 2025

Heading to college can be a thrilling time for many students, but amidst the excitement, it's easy to put off the financial part until after graduation. Walter Payton senior Aadi Kalra says, “I wish I had known more about the ways to pay for college before applying.” Recently, the amount of student loan debt in the U.S. has ballooned. According to Brookings, "Between 2000 and 2020, the total number of Americans owing federal student loans more than doubled from 21 million to 45 million, and the total amount they owed more than quadrupled from $387 billion to $1.8 trillion, growing much faster than any other form of household debt" (Yannelis 2024). This staggering increase highlights just how widespread student loan debt has become and how important it is for prospective college students to understand the financial implications of college. 

However, with the right strategies, the rising cost of college and the rising amount of debt owed can be mitigated. The first step is understanding loans. Federal student loans tend to offer more favorable terms than private loans, including lower interest rates and more flexible repayment options. Private loan rates depend on the lender, but they are typically higher. In contrast, federal loan rates are set. Currently, the rate is 6.53% (Education Data Initiative, 2024).

There are also ways to reduce the amount of loans taken out. One of these ways is through scholarships awarded by the school. Walter Payton College Prep guidance counselor Tamara Driver, says, “The biggest thing people need to realize about financing your college education is that the majority of aid will come from the college itself.” Another way is through private scholarships and grants, which don’t need to be repaid. A third way is through school choice, considering how much it will cost to attend a college can help narrow decisions by removing out-of-budget schools. Expensive private schools may be prestigious, but in-state options offer an excellent education at a fraction of the cost. 

The cost of college doesn’t need to be an insurmountable obstacle. By understanding the types of loans available, budgeting carefully, and exploring all financial aid options, students can make informed decisions about how to pay for their education. 

https://educationdata.org/average-student-loan-interest-rate 

https://www.brookings.edu/articles/what-went-wrong-with-federal-student-loans/#:~:text=Between%202000%20and%202020%2C%20the,other%20form%20of%20household%20debt 

Interviewee 1: Tamara Driver (Guidance counselor, Walter Payton College Prep)

Interviewee 2: Aadi Kalra (Senior, Walter Payton College Prep)