How Do Student Loans Work Reddit

Last Updated on May 19, 2022

How Do Student Loans Work Reddit

Student loans are a common part of the college experience. They provide students with access to a degree in a way that’s often more affordable than paying for it out of pocket. But how do student loans work?

In this article, we’ll break down how student loans work, how they’re different from other types of debt, and what you need to know about them.

How Do Student Loans Work Reddit

Student loans are essentially financial aid provided by the government or private entities that help cover expenses related to attending school. Students typically borrow money from the lender after applying for admission into their desired program of study. This money can then be used for tuition, housing costs, books and supplies, transportation costs (such as gas), and other essential expenses related to living on campus or off-campus during enrollment periods (like food).

How Do Student Loans Work Reddit

1. Look at all your options

There are alternatives to taking out student loans, and it’s good to look at these options first before applying for one. In this student loans reddit post, user Betsy514 outlines some of these alternatives, including choosing a cheaper school, taking a gap year, and applying to scholarships.

We here at Juno created our own scholarship database with over thousands of options that you can apply to to help finance your education.

However, if you do need to take out a student loan, which, according to the Chronicle of Higher Education, around 60% of college students do, you should start by looking at all your federal and private options.

Juno has multiple student loan guides that help explain your options, and breaks down the interest rates and costs of these options:

  • Undergraduate Student Loan Guide
  • Graduate Student Loan Guide
  • MBA Student Loan Guide

Researching your options is an important step in ensuring that you are making wise financial decisions. These options vary for different schools and programs. For instance, we here at Juno, along with this student loans reddit comment thread, recommend that undergraduate students should always look at their federal options before their private ones. If an undergraduate student meets the federal lending limit for direct loans, they then can turn to private lenders or parent PLUS loans and explore their options there. Look to our guides linked above to determine which options are best for your program. 

2. Create a budget to cut down on spending

If you have taken out student loans and are working to repay them, creating a budget can be helpful. Budgeting allows you to be more organized with your repayment plan and helps in setting you up for financial success.

This comment on a student loans reddit advice post breaks down where to start: “First you need to sit down and totally understand your income and your debt and create a budget based on your goals. This is going to take a lot of time. Here’s what you need to know:

  1. What is your household income?
  2. List all debts smallest to largest and their interest rates. Student loans and everything else except mortgage.
  3. List monthly expenses.
  4. Do you have an emergency fund/how much savings?”

A key part of budgeting is to try and cut down your spending on luxury items. 

In this student loans reddit post, user TheChilledPixel details how they paid off $115,000 in student loans.

“(I) used to pay large chunks (think $2.5k – 3k) of my paycheck right after it hits my bank account. Didn’t go out to eat (or get takeout in COVID times) often when my friends pressured me – opted to make home cooked meal and have a cookout at home instead. Got super aggressive with repayment in the past year. I mean like lean lean spending. Only spent money on the rent, phone, utilities, gas and groceries.”

It can be difficult to create a budget and cut down on spending, but if you have outstanding student loan debt it is definitely something to prioritize. User TheChilledPixel is now completely debt free! Budgeting and spending your money wisely is effective, and can help make your student loan expenses much more manageable. 

3. Make your payments on time

Interest accrues on your student loan payments, so make your payments sooner rather than later to avoid having to pay extra costs. To make these payments in a timely fashion, try cutting down on your spending — especially when it comes to luxury items.  

Reddit user yes_its_him’s reddit post on personal finance emphasizes the importance of staying on top of your payments: “Pay them back on schedule. It sounds crazy, but it just might work! If your income supports it, pay the minimum on low-interest (<~4%) loans. If you have even more income, repay them faster with extra payments, especially on higher interest loans, and save by paying less interest than you would over time.”

Don’t rely on student loan forgiveness and postpone your loan payments. Make sure to pay them back on schedule so you don’t have to pay more than anticipated. 

4. Pick up a side hustle or part-time job

If you’re having trouble paying off your student loans with just your primary source of income, consider picking up a side hustle or part-time job.

This student loans reddit thread details various jobs and activities people have picked up to help pay off their loans, including pet sitting, bartending, officiating, and miscellaneous online jobs. These online jobs have flexible hours and you can work in the comfort of your own home!

If you have the time and can make the commitment, a side hustle or part-time job can prove to be very useful, providing you with more flexibility in managing your money. 

5. Consider refinancing your private student loans

Refinancing your student loans isn’t always the best option for everyone, but can be very helpful in some cases. Currently, federal student loans are not collecting any interest until October 1, 2021 as part of COVID-19 relief. However, if you are currently repaying a private loan with a high interest rate, refinancing may be your best option, allowing you to lower your monthly payments and save more money. 

In this reddit post on student loans, user Zaerth talks about their experience with refinancing their private loan. “I’m going from paying nearly $900/month toward my private loans to $515/month. I extended the life of the loan by a few years in order to get that rate, but I’m planning on refinancing again in a couple years. And I can always pay more than the minimum payment. But for now, it’s a huge relief.” Zaerth said they wished they refinanced years ago. 

Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

how much do you have in student loans reddit

1. Skip the variable rate loans

Sallie Mae is far from the only private student lender that offers variable interest rates, but it’s best to avoid them regardless of where you go. 

In one post, user Thedisherofpipe saw their interest rate go as high as 10.75% because market rates increased. While fixed rates start out higher than variable rates, they stay the same throughout the life of your loan.

2. Most borrowers have no issues

Sallie Mae services roughly $22.4 billion in student loan debt, which likely translates to hundreds of thousands of customers. However, the Consumer Financial Protection Bureau (CFPB) only received 214 complaints about the lender in 2020. 

That’s not to say that there’s no guarantee you’ll never run into issues. But user ANGR1ST was right in this comment: “Serviced my loans fine without any hassle, just like they do for the vast majority of borrowers that then have no reason to comment it.”

Remember, people generally only write reviews when they had a really good or really bad experience, so take everything you read with a grain of salt.

3. Your best bet is to have a cosigner

Like all private student lenders, Sallie Mae reserves its best loan terms for people with excellent credit and a solid income — both of which can be difficult for college students to attain.

In one comment, user vballboss shared that they had a 720 credit score and earned $12 an hour working part-time. While they managed to get approved for a high, variable interest rate, their application was initially rejected. Had they applied with a creditworthy cosigner — which wasn’t possible for them at the time — they likely would’ve gotten a much lower interest rate and more affordable monthly payments.

4. Payment plans for hardship can be inflexible

If you’re struggling to afford your monthly payments on federal student loans, you can get on an income-driven repayment plan that cuts your payment to 10% to 20% of your discretionary income.

With a private lender like Sallie Mae, though, these options aren’t available. The lender does offer modified payment options, including a graduated repayment period for new graduates and forbearance. But don’t expect as much generosity as the federal government offers. 

In one comment, user Ms284 shared that on a $32,000 salary, the lowest payment Sallie Mae offered was $749 on their student loans. While they don’t share their balance information, it’s clear that federal loans would have provided more flexibility.

5. Rate reductions are possible, though

In one post, user jayelldub shared a positive experience about getting an interest rate reduction on their loans. You may be eligible for the program if you’re delinquent and your financial situation is eligible. If you qualify, you can get a lower interest rate and monthly payment for a limited time.

With a term and rate modification, you’ll get a lower rate and payment for a limited time plus a longer repayment term.

6. Customer service has improved

In the same post, user jayelldub shares that their experience re-enrolling in Sallie Mae’s rate reduction program in 2020 was much more pleasant than the two previous times they enrolled.

They shared: “My experience was VASTLY different than the 40+ calls I have made in prior years. They are so much nicer and much much more knowledgeable. I barely wanted to physically fight any of them.”

One of the commenters, user Freeman047, agreed with the assessment.

7. Still expect long hold times

While the lender’s customer service may have improved in some areas, that doesn’t mean it’s perfect. Last year, user Semb1ance shared their frustration with trying to contact the lender in a post. Not only could they not log in to their online account, but they also got no response from the chat feature in the Salle Mae mobile app and spent hours on the phone trying to speak with someone, only for the calls to get disconnected.

This may not be every customer’s experience, but if you have a question or issue, plan for long wait times.

8. If you settle, get the terms in writing

In one post, user boncbonc95 shared that they settled a student loan balance with Sallie Mae, only to have the remaining balance sent to a collection agency. They spoke with many customer service agents and got conflicting answers:

“They sold my account to collections in April but any agent I speak with say that they see in the account that it’s paid off. One agent said it’s because I never agreed to the terms of the settlement? But they accepted the money and considered it paid off so Idk.”

If you settle with any lender, make sure to get the full terms and payoff confirmation in writing, so you can fight the collection attempts.

9. Refinance if you can get better terms elsewhere

Whether or not your experience with Sallie Mae is good, it’s ultimately wise to consider refinancing once you’ve graduated and had some time to build your credit history and increase your income. 

In one post by user grad2010aa, they announced their intention to refinance, and most commenters agreed it was the right move. 

Refinancing could help you lower your interest rate and monthly payment and also give you the flexibility to choose a repayment term that fits your budget. Juno can help you score the lowest rates possible by negotiating with lenders on your behalf.

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