Borrow less and save more
Due to the way interest works, a small change in the amount a student borrows can result in a significant savings in the total cost of the loan.
Lana, a junior, borrows a Federal Stafford Subsidized Loan for $2,700 at 6.8%. If she makes $50 monthly payments after graduation, she will pay the following:
 Interest: $533
 Total repayment: $3,233
If Lana reduced the loan to $2,000, she would save more than the $700 difference in principal. With $50 monthly payments, she would pay the following:
 Interest: $275
 Total repayment: $2,275
By reducing the loan by $700, Lana would save $258 in interest and reduce her repayment by $958. She would also spend less time paying off the loan—approximately 4 years instead of 5 and a half.
To supplement the $700 difference, Lana may be able to find scholarship money by searching one of several scholarship sites. Lana could also get a parttime job through the Career Services.
Get a job instead of a loan
Jason, a dependent freshman, is deciding between accepting a $3,500 Federal Stafford Subsidized Loan or taking out a smaller loan and working to supplement the difference. His interest rate is 6.8% and he expects to make $50 monthly payments after graduation.
option

job

loan

money
available

interest

total loan cost

1

$0

$3,500

$3,500

$971

$4,471

2

$1,500

$2,000

$3,500

$275

$2,275

Amount saved by working: $2,196
 Option 1: Jason borrows $3,500 for the year. It will take 7 and one half years to pay it off, and he will pay $971 in interest.
 Option 2: Jason takes a job that will earn $1,500 and borrows only $2,000. He will still have $3,500 for the year. It will take him 4 years to pay off the loan. He will pay $275 in interest.
In both options, Jason had $3,500. However, option 1 will cost him $4,471 in the near futurea LOSS of $971 ($3,500  $4,471). In option 2, Jason earned $1,500, so his borrowing will cost only $2,000. He comes out $1,225 ahead ($3,500  $2,275).