Student Loans: Responsible Borrowing and Repayment

If there’s one thing we believe about establishing LuxuriousCREDIT™, it’s that you’re Worth The Investment! Whether it’s establishing good credit, starting a new business, buying a new home, or getting a college degree these things take time and effort. You’ve probably heard it said at least a thousand times that, “Anything worth having is worth working for.” When you DO the work, you are essentially investing in your own future.  Being a college student requires a great deal of hard work, discipline, commitment, and money! Yes, there are countless lifelong benefits to a college education, but let’s be honest, it’s not cheap. Most college students can reasonably expect to graduate with thousands, if not tens of thousands of dollars in student loan debt. If not managed properly, this debt can have a devastating impact on your credit and your future.


The most common types of student loan debt consist of loans that are guaranteed by the federal government. The term “guaranteed” means that the federal government has promised to cover the cost of the loan should you, the borrower, default on repayment. The most common type of loan guaranteed by the federal government is the Stafford loan. The Stafford loan is issued directly to the student applicant and it is the student who is required to repay the loan. PLUS loans are similar to Stafford loans in that they are guaranteed by the federal government but are issued to the parents of students. Perkins loans are offered to students in the low socio-economic bracket and are also federally guaranteed. Private loans are issued by individual banks, credit unions, individuals, and other private lending sources or institutions. Private loans are offered at the sole discretion of the lender with the terms and conditions they set.


There are a number of ways to obtain a student loan. Private loans are borrowed directly from the bank, credit union, or individual issuing the loan. Stafford loans can be borrowed directly from the Department of Education by way of the Federal Direct Loan Program or through a private lender such as a bank. The Federal Direct Loan Program manages its loans throughout the entire repayment. Some private lenders also manage their own loans during repayment. However, some lenders sell their loans to other companies that take over billing and collections. This is known as the secondary market. Sallie Mae handles at least one third of all student loans and is the biggest secondary market player.


Like any other form of debt, being strategic about how you repay your loans can save you time and money. Here are a few quick tips!

  • Pay on time: Many student loans programs offer rewards for timeliness and consistency. Depending on the terms of your loan, you may even be looking at an interest rate decrease once good repayment history has been established. A decrease in interest is a perk that can save you hundreds if not thousands over the term of repayment.
  • Take advantage of tax breaks: You may be able to deduct interest payments on student loans for up to 60 months. Check with your tax preparer or CPA!
  • Automatic Repayment: This is a great way to avoid missing payments which can automatically disqualify you from some of the benefits mentioned above. Also, many lenders offer an additional decrease in interest for specifically for signing up for auto repayment.
  • Simplify: If you’re managing more than one loan and juggling multiple lenders consolidation or serialization may be a good alternative. Consolidating your student loans requires refinancing but will bring all of your loans under one umbrella and will ultimately only require you to repay one source. Loan serialization is similar in that it allows you to make just one monthly payment but does not require you to take out any new loans. Speak to your lender about what the best option would be for you.
  • Alternative Repayment Options: Just like we all have different styles, preferences, and opinions, the standard repayment plan isn’t always a good fit for everyone. Depending on your situation and circumstances an alternative repayment option may work better for you. Extended, graduated, income-sensitive, and income-contingent repayment are a few of the most common accommodation that your lender may offer. After discussing these options with your lender, remember that each of them will increase the amount of interest that you will ultimately pay. Be careful to consider this before choosing an alternative repayment plan.
  • Special Circumstances: If you simply are not in a position where you can pay anything right now, deferment or forbearance may be the best option for you. These options allow you to take a break from repaying your student loans. As with the alternative repayment plans, the interest will continue to accrue. The longer you take to repay the loans, the more you will eventually have to pay.
Back to blog

Leave a comment

Please note, comments need to be approved before they are published.