Manage Student Loan Debt by Understanding Your Financial Aid Options

Accumulating debt in college may be unavoidable, but there are ways to minimize what you owe before you graduate.
Student loan for education concept : Dollar bag, graduation cap on row of coins on a table, depicts loan or money designed to help students pay for associated fees.
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When scientist Danielle Twum graduated from Vassar College in 2012, she left with a Bachelor of Arts degree in biology—and about $30,000 in student loans. “Quite small compared to the horror stories I’ve heard from other people,” she says.

Twum went on to graduate school at the Roswell Park Comprehensive Cancer Center, part of the State University of New York at Buffalo. “Going through grad school meant that I deferred student loan payments,” she says, “but it still accumulated interest.” Although Twum earned a yearly $24,000 stipend, the money was used up quickly on housing, necessities, and keeping her car running well enough to handle Buffalo, NY, winters. By the time she completed graduate school in 2019, her payoff amount for undergrad had increased to nearly $40,000.

“Now that I finished school, I’m luckily earning quite a good income,” says Twum, who lives in Menlo Park, CA, working as a field application scientist for LevitasBio. “All my money that I’ve been earning so far has been going to pay off credit card debt and student loans. But as much as I’m making good money now, I’m not out of the red, which I think a lot of people my age are dealing with.”

Indeed, according to consumer credit reporting company Experian, the average student loan debt is $35,359, totaling $1.4 trillion in 2019, the second-largest credit debt for Americans after mortgages.

Accumulating debt in college may be unavoidable, but there are ways to minimize debt before you graduate. Read on to learn how.

Find the Free Money First

It’s never too late to tap into scholarships and grants to help offset tuition, books, and housing. Since these types of funds don’t add to your student debt, they are the first place to look for extra money.

Scholarships are typically merit-based, so they have the added bonus of looking good on your résumé. You may already be familiar with the scholarships ACS offers for chemistry, biochemistry, chemical engineering, chemical technology, and science education. You can also try related organizations, such as AISES or AIChE, if they are appropriate.  

General sites detail where to find scholarship money, including Fastweb,,, Peterson’s, and

You can also earn awards in other categories, such as athletic and artistic performance. Every bit counts, so cast a wide net to see what you are eligible for. Look for unique scholarships, like $1,500 in Unigo’s Make Me Laugh scholarship or $10,000 in the National Potato Council’s scholarship for conducting research on the potato industry.

Federal college grants are usually based on financial need calculated by the difference between your total college costs and your Expected Family Contribution (EFC). EFC is the amount your family is able to contribute, based on your family’s income and assets as well as the number of current college-aged students in your family and other factors. The government calculates your EFC when you complete the Free Application for Federal Student Aid (FAFSA), which is why you need to fill it out for most programs.

Among government grants, the largest program is the Pell Grant, which can provide up to $6,195 in the 2019-2020 year. Your eligibility for Pell grants is automatically considered when you first complete the FAFSA, but it can’t hurt to re-check your eligibility, especially if your situation has changed.  

Other federal grants include the Federal Supplemental Educational Opportunity Grant, the Teacher Education Assistance for College and Higher Education Grant, and the Iraq and Afghanistan Service Grant. As long as you meet your school’s Satisfactory Academic Report, you do not have to pay back grant money.  

Grants and scholarships are available through schools, organizations, companies, and states, so be sure to research and apply for the ones you are eligible for, and meet application deadlines. 

Know your student loans

If you need to borrow money, “the best option generally tends to be the federal loans,” notes Kalman A. Chany, author of Paying for College. When it comes to loans, many experts recommend opting for federal loans over private loans for a many reasons.

Milyon Trulove, vice president and dean of Admission and Financial Aid at Reed College in Portland, OR, has made a career of helping students make the best possible financial choices for college, and agrees that federal loans are more advisable.

“The idea of federal loans is that a student has an opportunity and a really bright future, but they don't have money right now. And so the federal government says, ‘I want to invest in you … [so] that you will have upward mobility and that you'll gain benefits from this in the long run.’”

The U.S. Department of Education offers eligible students two types of Stafford loans: subsidized or unsubsidized. Subsidized means the government will pay interest on the loan while you’re in school or during grace or deferment periods. Unsubsidized means interest starts to accrue as soon as the loan is disbursed to the school. (Danielle Twum mentioned at the beginning of the article had an unsubsidized Stafford loan.) Those who aren’t able to meet the requirements for subsidized loans can opt for unsubsidized. Your FAFSA will determine which federal loans you are eligible for.

Trulove adds that federal loans have built-in protections for students, including income-based repayment plans, payments that start off small and gradually increase. They also consistently have favorable interest rates, Trulove says.  

“Federal loans also have practical responses to real-life circumstances.  If you lose your job, you can request a deferment or forbearance to suspend your payments for a time,” he notes. “The federal government provides plans that show they’ll work with you to make sure this loan is manageable.”

Private loans don’t always afford students those protections, he says, but there are some benefits to private loans. They aren’t based on financial need and you aren’t required to fill out the FAFSA to apply. In addition, most lenders offer fixed or variable interest rates, allow you to choose a repayment plan, and let you apply with a cosigner to increase your chances for approval. “If you’re interested in a private loan, start with your financial aid office; they can suggest the best approach,” Trulove says. “The next best option is often your bank or local credit union.”

So, the recommendation is to first take advantage of the free money, federal loans, and then when you have a complete financial aid package picture, see what gaps are left over and then maybe consider private loans. 

Understand the terms of your loan

If you need to compare loan options, make sure  you understand the terms: principal, interest, prepayment, and rate versus APR. Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, a nonprofit with a mission to ensure all consumers have access to free expert and unbiased student loan advice, breaks down the vocabulary:

“Your principal is the sum of money that was lent. It’s the amount that interest is calculated off of and can include capitalized interest,” she says. ”Interest is the fee you pay to borrow the funds. The longer you owe the funds the more you will pay in interest.”

Prepayment penalty, she explains, is a fee assessed on some loans for paying the loans off faster than the originally agreed upon term. There is a never a prepayment penalty on federal student loans, but there may be on private loans.

“While the interest rate is the amount you pay to borrow the funds, usually on a daily basis, the APR is the total cost of the debt on an annual basis, including fees. Both are expressed in a percentage,” she adds. “So while your interest rate might be say 2%, if the loan also requires things like origination or default fees, the APR might be 2.3%.”

Another very important note is to not take out more student loans than you need. It can be tempting to see the amount available to you and want to take it all, but keep in mind those funds come with interest. However much you borrow, you will pay back more.

How to Know What You Owe

It is easy to calculate the sticker price of earning a degree, but do you have a handle on how much debt you’re actually incurring?

To get an idea of what you have to pay back, use an amortization calculator, which gives you a payment schedule based on your debt, interest rate, and the frequency and duration of payments.

College Scorecard provides national data and statistics on debt, federal loan repayment, completion rates, and post-college earnings. Run by the Department of Education, the site provides information on 2- and 4-year degrees, certificate programs, apprenticeships, and graduate programs. Students can compare multiple median earnings and median debt of a school’s graduates to see different outcomes.

Sabrina Manville and Nick Ducoff left university administrator jobs in 2017 to launch Edmit, an online, data-driven tool that estimates tuition costs based on GPA, standardized test scores, ZIP codes, high school, and information about higher education institutions.  

“We saw how hard it was for families to understand how much college was going to cost and also what life was going to look like on the other side of it,” Manville says. “Our whole purpose is to help people understand the full financial picture.”

While Edmit is geared towards those just starting the college process, primarily, the program includes tools relevant for those currently enrolled, Manville notes. For instance, the site lists projected earnings by major.

“Someone who’s in college now could actually go to the site and see what the average expected salary would be for a graduate of their institution,” she says. “What we also can do with that is to put your student loan next to that and say, ‘OK, how much would you be paying? What portion of your salary will be going toward loan repayment?’ if you haven’t done that math.”

According to the latest surveys, new chemistry graduates earn around $40,000 with a bachelor’s degree and $75,000 with a doctorate, and, as C&EN reports, salaries increase to around $79,000 and $105,000, respectively, as you progress through your career.

Student loan debt can seem daunting, but taking a close look at your financial situation now can ease the pain later. So be smart, investigate your options, and find the aid that works best for you in the long run.

About the Author

Sara Schwartz
is a freelance editor and writer based in Alexandria, VA.