The Smart Way to Borrow for College: A Parent and Senior’s Guide

Published on 07/23/2026

College is one of the largest investments many people will make, and for around 40% of students, loans are a necessary part of the financial plan. Before making the decision to take out loans, it is important to evaluate your options and create a plan for borrowing and repaying loans. This guide walks you through the process step by step, with clear questions to ask and resources to explore.

Evaluate Your Options

Here are some key steps in deciding if student loans are right for you. 

Step 1: Know Your Real Starting Point

Before considering any loan, calculate exactly how much you actually need to borrow. Check out our recent article to learn more about reviewing financial aid offers to better understand your starting point. Begin with your total cost of attendance—tuition, fees, room and board, books, and other expenses. Subtract every dollar of gift aid that never needs repayment: federal Pell Grants, state grants, institutional scholarships, and private scholarships. What’s left is the gap. Now ask the practical questions: 

• Will family members contribute from savings or a 529 plan?
• How much can you earn from a part-time or summer job?
• Am I going to work throughout college to help cover costs? 

If the combined contributions from family and work still fall short, loans will likely be part of your plan. This honest assessment prevents over-borrowing and sets realistic expectations for repayment. Each student, along with their support network, will need to decide how much debt is manageable. Sometimes, this means re-evaluating the college choice and seeking out new options.

Step 2: Start with Federal Loans—Usually Your Best Bet

If you’ve filed the FAFSA, you’ll automatically be offered federal Direct Loans. These come with fixed interest rates that don’t change over the life of the loan, flexible repayment plans including income-driven options, and no credit check or co-signer required. For many families, exhausting federal options first is the smartest move because of these built-in protections and potential forgiveness programs—though those programs can change and shouldn’t be counted on as a guarantee. Federal loans also offer deferment if you return to school later. Always accept the full federal Direct Loan offer before looking elsewhere.

Step 3: Consider Parent PLUS Loans If Needed

Parents of undergraduates can apply for federal Parent PLUS Loans to help cover remaining costs. These are the parent’s responsibility alone, with credit checks required. The interest rate is fixed but higher than student Direct Loans, and repayment typically begins immediately—though deferment options exist. If your parents are comfortable taking on this debt and can manage the payments, it can bridge the gap without requiring the student to borrow more. Discuss this option openly as a family before deciding.

Step 4: The Minnesota SELF Loan—Your Local Advantage

For Minnesota families, SELF Loan from the Minnesota Office of Higher Education fills the gap after federal loans are maxed out. Current rates as of July 1, 2026, are competitive: fixed rates start at 6.00% for a 10-year term, with variable options even lower at 5.70%. You can choose 10-, 15-, or 20-year repayment terms, and annual limits reach up to $20,000 or $40,000 depending on your program. 

The big selling point? Interest rates are the same for every borrower and not based on credit scores or income—unlike most private loans. You know your exact rate before you apply, with no application, processing, or guarantee fees. This transparency and consistency make SELF a trusted local option that often beats private lenders on cost and predictability.

Step 5: Private Loans as a Last Resort

Only after exhausting federal and SELF options should you consider private loans. These can fill remaining gaps but typically require a co-signer, base rates on credit scores, and offer fewer repayment protections. Shop carefully, starting with recommendations from your school’s financial aid office, and compare total costs including fees and origination charges. Never borrow more than you need or can afford to repay.

Key Questions to Ask Before Signing Anything

There are a lot of considerations when planning to borrow student loans. Below are a few additional questions that can help guide you as you decide how to finance your education.

• Does this loan require a co-signer, and who would that be?
• What is the interest rate—fixed or variable?
• What is the repayment term, and when do payments begin?
• Are payments required while I’m still in school?
• Are there deferment options if I return to school later? 

For SELF Loans specifically, you’ll make at least $15 monthly payments while enrolled, with no grace period or forgiveness programs available—important details to understand upfront. Your campus financial aid office can answer these questions and help compare your full package.

Making the Decision as a Family

The most important conversation is about what debt level feels manageable after graduation. A $30,000 loan might be reasonable for a student entering a high-paying field, but crushing for someone pursuing teaching or social work. Re-evaluate your college choice if the numbers don’t work—community college for the first two years, scholarships, or a different school can dramatically change the equation. The goal isn’t to avoid debt at all costs, but to borrow only what supports your education and future without regret.

Your Next Steps

File or review the FAFSA if you haven’t already. Contact your chosen school’s financial aid office with specific questions about your award letter. If you’re in Minnesota, explore the SELF Loan after accepting your federal loans. Take time to run the numbers, discuss as a family, and make a plan you can stick to. Borrowing wisely now means you’ll graduate with the education you want and the financial freedom to build the life you envision. The investment in college can pay off for decades—when you borrow smart, it starts paying off from day one.