College and university tuitions are increasing every year and many use student loans when financing their education hoping to qualify for student loan forgiveness when they graduate. At $1.31 trillion, according to NerdWallet, student loan debt is higher than automobile loans or credit card debt. The average student loan debt is about $49,905.

Sadly, some students misunderstand student loan forgiveness or decide not to pursue a career that would erase their debt after graduation. Many more know the debt must be repaid but make costly mistakes and end up paying more or worse yet, get garnished or sued for the balance. Here are seven student loan mistakes you need to avoid.


  • Paying late or missing a payment. Some borrowers are under the impression that student loan providers do not report to the credit bureaus. This is not true. Missed payments and late payments can show up on your credit report and affect your financial future, even if you have federal loans. Continuous late payments can lead to default and you could be sued and have your wages garnished. Make your student loan payments a priority. Remember, it is very difficult to get student loans discharged in a bankruptcy.
  • Setting up a payment plan that doesn’t fit your budget. The Department of Education offers two repayment plans for federal student loans. One allows you to pay off your loan in 10 years. Your monthly payment will be higher but your total payoff will be less. Borrowers concerned about their ability to repay the loans can choose a plan based on their income. If you lose your job or take a lower-paying position, your payments will be adjusted. You will pay more interest and it could take longer to pay back the loans. Choose the wrong plan and you could end up paying a higher interest rate you don’t want or getting in trouble if you can’t make the higher payments. And unless you choose a payment plan, you are automatically placed on the 10-year plan.
  • Not taking advantage of automatic payments. You won’t have to worry about missed payments if you set up automatic payments. An added bonus is student loan servicers will give you a discount for automatic payments.
  • Failing to consolidate your loans. You have options to consolidate your loans if the loans are federal. You must be past the grace period when you apply. Consolidation can save you money while making your payments affordable.
  • Delaying payments for years. Student loan forgiveness is a hot political topic. Don’t delay your payments thinking your loan will be forgiven at some point. Your best option is to explore an income-driven repayment plan or consider debt relief. Don’t wait until the politicians decide to reduce or forgive student loans.


These next tips are for students and their families who are going to college in the fall. What you do with student loans now can affect your payments later.

  • Borrowing too much. Every family fills out the free application for student aid, also known as FAFSA, before the student enrolls. But just relying on what FAFSA says is a mistake and could lead you to borrow more money than you really need. You have other resources to consider which include a part time job off or on campus. And don’t forget that scholarship money may also be available through the college or other sources. Do your homework and you may not have to borrow as much as you think.
  • Using them for living expenses. You decided since you were eligible for a large amount of money for student loans, you would borrow it and use if for your living expenses. This may be great when you are in school. You could avoid working a part-time job or spend the extra money on things you want. But one day you will either graduate or stop attending college. And you will still have to pay back those loans. The more you have borrowed, the more you will have to pay back.

Taking out a student loan is a just like any other decision. Do your homework, make sound decisions and don’t jeopardize your financial future.

Paul J Paquin is the CEO at Golden Financial Services and the author of the book called; “A Complete Debt Consolidation Guide to Become Debt-free”. Paul spent the last 15-years engulfed in debt consolidation, as the CEO at Golden Financial Services, learning about the most effective debt relief options by researching and testing different methods.