Given the skyrocketing cost of higher education, fewer and fewer families can afford college without some form of financial assistance. For many students, loans are what make the difference between attending college and not. But it’s important to plan these loans carefully to avoid a financial nightmare after graduation. Here are five tips for keeping student loans under control.

1. Work backwards. Most families look at the cost of college and determine the amount to borrow based on how much they need to cover their student’s expenses. But failure to think realistically about how loans will be repaid can lead to trouble down the road.

A better approach is to try to estimate your student’s monthly loan payments after graduation and determine whether his or her expected income is likely to meet all financial obligations — including the loan. Many resources are available to predict a grad’s job and income prospects based on major, degree, institution and other factors. These include PayScale College Salary Report (payscale.com) and the College Scorecard (collegescorecard.ed.gov).

If you expect a shortfall, there are several options to consider. For example, your student might work while in school to cover some living expenses or plan to live at home for a time after graduation. Your student could look for lower (or no-) cost financial aid, attend a less-expensive school or reconsider his or her field of study.

2. Avoid using loans for living expenses. Try to borrow only what’s needed for tuition, school fees, books and educational supplies. Although it’s tempting to use loans for room and board and other living expenses, doing so can easily double student loan amounts. Better options include working part-time, living at home or participating in a work-study program.
3. Keep an eye on interest. Interest can quickly spiral out of control, especially if it accrues (that is, accumulates without the need to pay it currently) while your student is attending college. Consider paying accrued interest during college to minimize the financial burden after graduation. Note that subsidized federal loans don’t accrue interest while a student is still enrolled.
4. Scrutinize the terms. Student loans generally are categorized as either federal student loans (FSLs), which can be subsidized or unsubsidized, or private student loans (PSLs) from banks or other lenders. Generally, FSLs have lower interest rates and more flexible terms. But regardless of the loan type, it’s critical to discuss the terms with your lender and to carefully read the promissory note and other loan documents. Loans may contain clauses that can increase parents’ or students’ risk. For example, some PSLs provide that, if a co-signer dies, the entire loan balance is due immediately.
5. Get professional help. Financial aid is extremely complicated and missteps now can lead to financial hardship later when the new graduate is trying to strike out on his or her own. It pays to discuss your options with experienced financial advisors who can help you develop a realistic plan for financing college expenses.

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