You’ve probably heard that borrowing money to pay for college is something lots of students do, but it’s important to understand what you’re getting into. Yes, taking out loans to fund school is fine. Yes, a college education is worth the investment—even if you borrow. But think before you accept the entire amount of all student loans offered to you on a financial aid award letter.

The award letter doesn’t just offer awards.

The term “award” might be confusing, but it’s essential to understand that your financial aid letter will list a combination of loans, grants, scholarships, and work-study. If you’re unsure of any part of it, call the college’s financial aid office. Don’t make the mistake of assuming that your “total award” amount is all free/gifted money.

Loans aren’t free money.

This sounds obvious, but it’s worth repeating. One day, you will have to repay your student loans (plus interest). Think about what your future career will be and whether you can realistically afford to make a monthly loan payment once you graduate and start working. It’s also wise to make sure you understand the loan’s terms/conditions and repayment options.

There’s a limit to what you can borrow.

If you’re an undergraduate student, you can borrow up to $5,500 per year in college-based loans under the Federal Perkins Loan Program, depending on your financial need, the amount of other aid you receive, and the college’s availability of funds. You also can borrow between $5,500 to $12,500 per year in federal Direct Subsidized Loans and Direct Unsubsidized loans, depending on certain factors. Learn more about borrowing limits.

When in doubt, borrow only what you need for tuition and fees.

Maybe there’s a “gap” between what college will cost and how much you can pay from your own savings or, say, financial help from parents. Loans are one option, but also think about whether you can work part time to help pay expenses like rent, books, and other personal needs.

Federal loans have lower interest rates.

Most often, the interest rate on federal student loans is lower than rates you would find on private loans. If you’re going to borrow, federal student loans are the way to go – it all starts with filling out the Free Application for Federal Student Aid (FAFSA), remember. Even better, you don’t have to begin repaying federal loans until after you graduate or drop below half time as a student.

Federal loans have a standard repayment schedule of 10 years.

Think about it: If you’re in school for four years and take 10 years to pay it off, that’s a debt that will saddle you for quite a while. Think about cutting down the time by making payments larger than the minimum. It comes down to whether you can afford to do so once you’re out of school.

You have other options to help fund school.

Even if you aren’t awarded any grants, you could get work-study aid. Work-study jobs are often on campus, making them very convenient, and most will work around your class schedule. If you don’t receive a work-study award, make sure to check out merit-based (vs. need-based) work-study and military tuition assistance options.

Taking out student loans to pay for part of your college education is nothing to be nervous about—but be smart about it. Federal and state financial aid can help you reach your goals and make college a reality. Just make sure you’re careful about how much you borrow so that when the time comes to pay those loans back, it works within your budget.

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