Loans: what to take and what to refuse

Not all borrowing is equal, and the order you take it in matters more than almost any other financial decision in the process.

Federal subsidized loans come first. The government pays the interest while you're enrolled, which makes them meaningfully cheaper than everything else available, and they carry the federal protections—income-driven repayment, deferment, forbearance—that private debt does not.

Federal unsubsidized loans come second. Interest accrues from disbursement, so they cost more than subsidized, but they keep the same protections and the same fixed rate regardless of credit history.

Private loans come last, and often shouldn't come at all. Rates depend on credit, usually require a cosigner, and lack income-driven repayment and the discharge provisions federal loans include. A private loan that looks cheaper today can become the only debt you can't restructure later.

Refuse what you don't need. Aid letters list the maximum you may borrow, not a recommendation, and accepting the full amount because it's offered is how students end up repaying money that funded a comfortable rather than necessary year.

Use a rough ceiling: total borrowing across the degree under your expected first-year salary. It's crude, but it's the difference between a manageable payment and one that dictates which jobs you can take.

And every dollar of scholarship you win is a dollar you don't borrow at interest. A $2,000 award isn't $2,000—over a ten-year repayment it's closer to $2,600, which is the real reason the small local awards are worth the evening.