16.9 million.

That’s how many students are going to college at the undergraduate level this fall. Of that number, roughly half – 46% – will take out federal student loans. It’s a decision that could bring certain rewards – not the least of which is a well-paying job – but it can also come with serious economic consequences.

The average debt for the class of 2017 was an estimated US$28,650. And not everyone is able to make steady payments on their student loans. The federal government reports that 10.8% of student loan borrowers who entered repayment in 2015 have since defaulted.

As researchers who specialize in how money shapes the way people make education decisions, here are five tips for students and families thinking about how to pay for college.

1. File for federal aid early using old tax returns

Even though this seems like a routine thing to do, more than 2 million people do not file a Free Application for Federal Student Aid, better known as the FAFSA. Sometimes parents and students don’t know about this form. Some parents may be unwilling to provide their tax return information, which is used to determine eligibility for student aid.

Filing the FAFSA can be particularly important for students whose families have little or no money to pay for college. In these cases, students may be eligible for the federal Pell Grant program, which is awarded to students with significant financial need and does not have to be paid back. Filing the FAFSA may also be required for other financial aid that students get from the state or the college they plan to attend.

As of 2015, students can use their “prior-prior year” tax return to complete their FAFSA. For instance, a student filing a FAFSA in 2019 can use information from their 2017 federal tax return. This allows students to complete the FAFSA as early as possible to understand and compare aid packages and financial options, instead of having to wait on more recent tax returns. FAFSAs for the 2020-2021 school year can be filed in October 2019, giving students more time to understand and compare financial aid packages and options.

2. Understand different types of loans

Different loan options include federal loans, private loans from banks or credit cards.

Federal loans are typically your best option. This is because federal loans often have low fixed rates. Federal loans also have provisions for deferment, a time period where your loans do not accrue interest. They offer a grace period before the repayment period begins and forbearance, which is a time period where you might be allowed to postpone paying if you’re having trouble making payments. However, during forbearance, your student loan monthly balance continues to accrue interest. Federal loans also come with various repayment programs, such as income-based repayment.

You may see options for subsidized and unsubsidized loans. Subsidized loans are funded by the government and offer better terms. They are based on need and do not accrue interest while you are still in school. Unsubsidized loans may be available regardless of your financial need, but they accrue interest as soon as the loan is distributed to you.

Private loans tend to have higher interest rates, although rates for these loans and credit cards can fluctuate. Private loans also do not allow for participation in government repayment programs.

3. Contact your financial aid adviser

Call the financial aid office to figure out who is your assigned financial aid adviser at the school you plan to attend. This person will be able to help you better understand your institutional aid package.

Review the different sources of aid listed in your financial aid award letter. Some sources of aid may be institutional grant aid, which is essentially financial aid offered from the college you plan to attend.

Other sources include federal loans and federal work-study. Federal work-study is neither a grant nor a loan. Instead, this program allows students to defray education expenses by working on campus.

Some schools package loans, such as Parent PLUS loans, directly in the award letter to you and your family.

4. Understand the impact of debt

Taking out loans for college can be an investment in your future, especially when loan money allows you to work less and to focus more on coursework to complete your degree in a timely manner. Research consistently shows that a college degree is worth the cost. On average, college graduates earn far more over the course of their professional career than peers who didn’t get a college degree.

However, students taking out loans should be conscious of how much they are borrowing. Unfortunately, many students do not know how much they owe or how student loan debt works.

Access the National Student Loan Data System to learn more about your personal federal loans. Over 1 million borrowers in the U.S. are currently in default on their student loans after they failed to make monthly payments for a period of about nine months. Defaulting on student loans can have serious consequences that hurt your credit and prevent you from receiving financial aid in the future. The federal government may also garnish a portion of your wages or withhold your tax refund. You can also lose eligibility for loan deferment and forbearance and ruin your credit score.

Additionally, taking on a significant amount of debt can have other long-term implications. For instance, debt can hurt your ability to purchase a home or move out of your parents’ home.

5. Know your repayment options

In thinking about your repayment options, there are many factors that may influence how much money you might make after college, including your major and career path. Since your future salary can influence your ability to pay back loans, it is important for borrowers to have a sense of earnings across different fields and industries. Yet, many college students do not have an accurate idea of how much money they can expect to earn in the careers they are considering, although this information can be found in the federal government’s Occupational Outlook Handbook.

There are several options designed to help borrowers repay their loans, including plans based on income level and loan forgiveness programs.

To make loan payments more manageable based on your income, consider an income-driven repayment plan based on your loan and financial situation. Borrowers need to apply for income-driven repayment plans. Income-driven repayment plans allow borrowers to pay somewhere between 10% and 20% of their discretionary income toward their student loans each month, rather than the predetermined payment based on loan size.

Borrowers might also research loan forgiveness programs offered by their state or for certain professions. These types of programs may be available that provide students funding while in college, or that forgive a portion of loans if graduates enter jobs where qualified individuals are needed, such as the teaching profession.

Another option might be the Public Service Loan Forgiveness program offered by the federal government to students working in public service jobs, such as teaching or not-for-profit organizations. However, the vast majority of people who apply for Public Service Loan Forgiveness have been denied.

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The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.